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Essays on the incentive effects of United States welfare policy

Posted on:1995-03-23Degree:Ph.DType:Thesis
University:University of PennsylvaniaCandidate:Powers, Elizabeth TerryFull Text:PDF
GTID:2476390014490790Subject:Economics
Abstract/Summary:
This dissertation consists of three essays about how people respond to welfare policy. The first two essays examine the potential effects of the asset limit in welfare programs on saving. The existence of the asset limit is typically ignored in welfare program analysis. Theory predicts that among some groups, the prospect of facing an asset test discourages wealth accumulation. In the first essay, I examine wealth holdings of female-headed households in an era of significant interstate variation in asset limits. Based on theory and simulation results for two period models, as well as descriptive statistics, I argue that a positive relationship between wealth holdings and asset limits supports the hypothesis. A one dollar differential in the asset limit is estimated to induce a 30 to 60 cent wealth differential. The paper also includes a detailed discussion of the implementation and enforcement of the asset test, and an examination of the asset data in the National Longitudinal Survey of Women. The second essay examines the saving response to prospective welfare participation spells using data from the 1984 panel of the Survey of Income and Program Participation. Estimates of an augmented life cycle saving equation indicate that those about to participate in welfare programs save significantly less than their peers and that expectations of future welfare participation also lead to reduced saving. I also find that fairly large proportions of those beginning a welfare spell held wealth above the program limit in the year prior to entry. In the third and final essay, I estimate the effect of the benefit schedule, which is nondecreasing in the number of children, on childbearing decisions of female heads of household, treating the childbirth and participation decisions in a sequential framework. I find that there are small but significant positive effects of benefit policy on births, but that elimination of the differentials would not lead to substantial reductions in the cost of the AFDC program. Perhaps surprisingly, I also find that welfare mothers are no more likely to give birth to additional children than female heads who are not participating, holding other factors constant.
Keywords/Search Tags:Welfare, Essays, Effects, Asset
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