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The 1993 EITC Expansion and Low-Skilled Single Mothers’Welfare Use Decision

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  • Hau Chyi

Abstract

Previous studies on low-skilled single mothers generally focus on the binary decisions of either welfare use or work. However, work among welfare participants has increased steadily since the mid 1990s. This study estimates the joint probability of the two decisions using a bivariate probit model. I investigate the role of the 1993 EITC expansion on the decline of welfare caseloads.Using monthly welfare use and work information from the Study of Income and Program Participation, I find that the 1993 EITC expansion has at least the same effect on reducing welfare use as the welfare reform initiatives, in particular, welfare time limits. Moreover, the elasticity estimates indicate that single mothers, especially those who were not employed and dependent solely on welfare before the expansion, were more responsive to the EITC expansion than to welfare time limits. Finally, the increase in work among welfare participants is due to the relative ineffectiveness of the policies in reducing the net population of those who are on welfare and work simultaneously.

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  • Hau Chyi, 2013. "The 1993 EITC Expansion and Low-Skilled Single Mothers’Welfare Use Decision," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    • Handle: RePEc:wyi:wpaper:001984
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    References listed on IDEAS

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    1. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1063-1114.
    2. Michael P. Keane & Kenneth I. Wolpin, 2010. "The Role Of Labor And Marriage Markets, Preference Heterogeneity, And The Welfare System In The Life Cycle Decisions Of Black, Hispanic, And White Women," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 851-892, August.
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    6. Charles Michalopoulos, 2004. "Welfare Time Limits in the United States," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(2), pages 64-68, 07.
    7. Jeffrey Grogger, 2003. "The Effects of Time Limits, the EITC, and Other Policy Changes on Welfare Use, Work, and Income among Female-Headed Families," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 394-408, May.
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