Marriage and Economic Incentives: Evidence from a Welfare Experiment

Can economic incentives be used to affect marriage behavior and slow the growth of single-parent families? This paper provides new evidence on the effects of welfare benefit levels on the marital decisions of poor women. Exogenous variation in welfare benefits arises from a randomized experiment carried out in California. Whereas previous studies have measured women's responses to year-to-year changes in welfare benefit changes, I am able to measure responses over longer periods of time. The analysis recognizes that married women can receive AFDC benefits under some circumstances, and distinguishes between transitions into marriage and transitions out of marriage. I find that higher benefits encourage aid recipients who are married to divorce, but have little effect on the probability that single-parent aid recipients marry. The effects on married recipients become larger over time and do not appear to be measuring responses to other, simultaneous changes in California's welfare system. For policy purposes, these results suggest that states can increase the incentive to stay married by increasing two-parent benefits relative to single-parent benefits, an option that only recently became allowed by federal welfare reform.