evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

the effects of welfare and tax reform the material well being of single mothers in the 1980s and 1990s abstract the tax and welfare programs that provide income and in kind benefits to single mothers have changed dramatically in recent years these changes began as far back as the mid 1980s and culminated with the 1996 welfare law that ended welfare as we knew it these tax and welfare changes have sharply increased the employment of single mothers and cut welfare rolls however little is know about the effects of these policy changes on the material well being of single mothers and their children studies of those leaving welfare have found that a substantial percentage have problems paying rent purchasing enough food and paying utility bills other studies found a decline in income among the worst off single mothers after 1994 or 1995 the goal of this paper is to examine the material well being of single mothers and their families before and after recent welfare and tax reforms using data from two nationally representative household surveys we examine the consumption patterns of single mothers and their families from 1984 2000 we find that the material conditions of single mothers did not decline in recent years either in absolute terms or relative to single childless women or married mothers this pattern holds for the average single mother as well as for low educated single mothers at both the 15th and 25th percentiles of the consumption distribution in most cases our evidence suggests that the material conditions of single mothers have improved slightly

accounting for the decline in afdc caseloads welfare reform or the economy we use state level monthly panel data to assess the relative contributions of the macroeconomy and welfare reform in accounting for the 1993 96 decline in aid to families with dependent children afdc caseloads our results suggest that the decline in per capita afdc caseloads is attributable largely to the economic conditions in states and not to waivers from federal welfare policies nationwide we attribute 66 percent of the decline to the macroeconomy however we do find substantial heterogeneity in the impact and timing of alternative waivers on afdc caseloads states with waivers impacting parental responsibilities experienced greater caseload declines than states with waivers that made work more attractive overall our model predicts that had it not been for the influence of economic factors welfare reform would not have led to any decrease in aggregate caseloads

strategy proof exchange we consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences in such a setting standard allocation rules such as walrasian equilibria or rational expectations equilibria are not compatible with individual incentives we characterize the set of allocation rules which are incentive compatible or in other words the set of strategy proof social choice functions social choice functions which are strategy proof are those which can be obtained from trading according to a finite number of pre specified proportions the number of proportions which can be accommodated is proportional to the number of agents such rules are necessarily inefficient even in the limit as the economy grows

new tests of the life cycle and tax discounting hypotheses abstract we first test a version of the permanent income consumption function recently suggested by barro the results support the theory except that consumption expenditures show sensitivity to transitory income next we use the consumption model to test the tax discounting hypothesis which is strongly supported this support for tax discounting disagrees with results from some earlier studies using more traditional specifications of the consumption function however we show that when certain obviously inadequate estimation procedures are corrected the traditional models also support tax discounting this uniform support for tax discounting suggests that the sensitivity of consumption to transitory income is not due to liquidity constraints

welfare recipient work choice and in kind benefits in washington state we analyze the work choice of welfare recipients potential welfare recipients compare their on and off welfare utility from after tax income and in kind benefits via employment or welfare and choose whether to work our null hypothesis which we reject is that benefits affect only the decision to work or not not the hours worked which will depend on wages using temporary assistance for needy families tanf administrative data from washington state we find that employer provided health insurance and child care subsidies significantly raise exit rates of tanf recipients and induce greater work effort other work inducing factors include wages and the earned income tax credit while increased levels of medicaid food stamps and the income guarantee increase welfare dependency

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

welfare dynamics under time limits among the most important changes brought about by the personal responsibility and work opportunity reconciliation act of 1996 are time limits which provide consumers with an incentive to conserve their welfare benefits for future use among forward looking expected utility maximizing consumers who face liquidity constraints and earnings uncertainty economic theory predicts that the incentive to conserve should be strongest among families with the youngest children we test this prediction using data from florida s family transition program a randomized welfare reform experiment our estimates generally exhibit the predicted age dependence which suggests that time limits affect welfare use before they become binding our estimates indicate that in the absence of other reforms that increased welfare use ftp s time limit would have reduced welfare receipt by 16 percent

asset returns and government budgets in a small open economy empirical evidence for canada abstract in this paper we test the validity of the ricardian equivalence hypothesis by examining the relationship between the term structure of asset returns and macroeconomic policy variables our study extends the work of plosser 1982 1987 to the canadian case adapting his analysis to the small open economy the empirical results we obtain are consistent with the debt neutrality proposition of the ricardian equivalence hypothesis

do states play welfare games abstract this paper uses a panel of state level annual data from 1983 to 1994 for each of the contiguous united states and the district of columbia to explore the degree to which states simultaneously set welfare benefits using instrumental variables estimation we find substantial empirical evidence that is supportive of the notion of welfare competition furthermore we find that state responses to neighbor benefit decreases tend to be significantly larger in magnitude as their responses to neighbor benefit increases our results therefore have potential implications for public policy in the wake of the increased decentralization of welfare policy associated with the welfare reform of 1996

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

coalitional strategy proofness in economies with single dipped preferences and the assignment of an indivisible object we study two allocation models in the first model we consider the problem of allocating an infinitely divisible commodity among agents with single dipped preferences in the second model a degenerate case of the first one we study the allocation of an indivisible object to a group of agents our main result is the characterization of the class of pareto optimal and coalitionally strategy proof allocation rules alternatively this class of rules which largely consists of serially dictatorial components can be characterized by pareto optimality strategy proofness and weak non bossiness in terms of welfare furthermore we study properties of fairness such as anonymity and no envy journal of economic literature classification numbers d63 d71

the behavioral effects of welfare time limits time limits are among the most fundamental of recent welfare reforms whereas welfare benefits were an entitlement under the old aid to families with dependent children afdc program the personal responsibility and work opportunity reconciliation act of 1996 prwora which replaced afdc with the temporary aid to needy families tanf program restricts most families to 60 months of federally funded benefits although the states are free to extend benefits further using their own funds almost all have incorporated some sort of time limit into their tanf programs time limits may affect welfare receipt in two distinct ways the most obvious effect is mechanical reducing welfare use once recipients exhaust their benefits however time limits may also reduce welfare receipt before recipients reach the limit if families are forwardlooking they may reduce their current welfare use in order to preserve their benefits for the future the purpose of this paper is to provide evidence on such anticipatory or behavioral effects of time limits i use data from the survey of income and program participation sipp to replicate my earlier estimates based on the current population survey cps i also exploit the sipp to relax some of the restrictive assumptions that were implicit in my previous work

the effects of time limits the eitc and other policy changes on welfare use work and income among female headed families of all of the welfare reforms that were implemented during the 1990s time limits may represent the single greatest break from past policy this paper expands on what is known about this important welfare reform measure by exploiting the predictions from grogger and michalopoulos 2003 to estimate the effects of time limits on welfare use employment labor supply earnings and income among female headed families results based on data from the march current population survey suggest that time limits have had important effects on welfare use and work accounting for about one eighth of the decline in welfare use and about 7 of the rise in employment since 1993 they have had no significant effect on earnings or income however the analysis also shows that the collective effects of other reforms have had important impacts on employment and labor supply furthermore it identifies the earned income tax credit eitc as a particularly important contributor to both the recent decrease in welfare use and t

almost all equilibria in dominant strategies are coalition proof abstract we prove that almost all equilibria in dominant strategies of finite strategic games are coalition proof also we investigate existence of coalition proof equilibria of separable games and strategyproof mechanisms in particular we give an example of a strategyproof mechanism which is defined for strict orderings and which is coalition proof but not coalitionally strategyproof

strategyproof assignment by hierarchical exchange we give a characterization of the set of group strategyproof pareto optimal and reallocation proof allocation rules for the assignment problem where individuals are assigned at most one indivisible object without any medium of exchange although there are no property rights in the model the rules satisfying the above criteria imitate a trading procedure with individual endowments in which individuals exchange objects from their hierarchically determined endowment sets in an iterative manner in particular these assignment rules generalize gale s top trading cycle procedure the classical rule for the model in which each individual owns an indivisible good

individual versus group strategy proofness when do they coincide a social choice function is group strategy proof on a domain if no group of agents can manipulate its final outcome to their own benefit by declaring false preferences on that domain there are a number of economically significant domains where interesting rules satisfying individual strategy proofness can be defined and for some of them all these rules turn out to also satisfy the stronger requirement of group strategy proofness we provide conditions on domains guaranteeing that for all rules defined on them individual and group strategy proofness become equivalent we also provide a partial answer regarding the necessity of our conditions

government deficits and aggregate demand abstract the evidence presented in this paper indicates that changes in government spending transfers and taxes can have substantial effects on aggregate demand the estimates also indicate that the promise of future social security benefits significantly reduces private saving each the basic implications of the so called ricardian equivalence theorem is contradicted by the data the results are consistent with the more general view of the effects of fiscal actions and fiscal expectations that is described in the paper

interest rates and expected future budget deficits in the united states several recent empirical studies have found no evidence of a positive association between interest rates and current and past budget deficits one possible explanation for this finding is that interest rates are related much more to the expectation of future budget deficits than to current and past budget deficits in this paper i investigate whether this explanation is valid finding no evidence that it is section ii briefly formulates and discusses the hypothesis under consideration stating some of its implications section iii presents the results of regressing the commercial paper rate moody s aaa bond rate and the ex post real commercial paper rate on current and past government spending budget deficits and real money supplies the regressions have been fitted to the entire sample of monthly data spanning the period between june 1908 and march 1984 and to 11

policy watch the 1996 welfare reform welfare reform legislation was passed in the summer of 1996 four key research questions that the new law presents to social scientists are as follows 1 can states design and operate better programs than afdc this includes questions about the ability of afdc women to work a significant number of hours the legislation s effect in areas of concentrated urban poverty and the extent to which women will be able to improve their families economic status under the legislation 2 will jobs be available 3 how will the new block grant affect states fiscal situation and 4 what new research methodology questions does this legislation introduce

government debt government spending and private sector behavior a current period tax reduction financed by issuing government debt shifts the timing of tax collection from the current period to the future if the future taxes implied by government debt are not fully perceived and discounted by the private sector there will be a net wealth effect that increases private sector consumption thus reducing capital accumulation and growth if on the other hand the implied future taxes are perceived and discounted by the private sector the current period tax reduction will be used to increase private saving to pay for the future taxes and government debt will be absorbed without any real effects on the economy the effects of government spending financed by current period taxation also depend upon private sector perceptions 2 if the benefits of government spending are ignored private sector consumption will decrease in accordance with the reduction in permanent disposable income to the extent that government spending is on consumption type goods that are perceived as substitutes for privately provided consumption goods there will be a relatively greater reduction in private sector consumption to the extent that government spending is on investment type goods yielding future goods and services that are perceived as substitutes for future privately provided consumption goods there will be a relatively smaller reduction in private sector consumption the standard approach to modeling private sector consumption saving behavior involves a rather asymmetric set of assumptions as to how the private sector perceives the various elements of government fiscal policy 3 current period taxes are assumed to be fully perceived but current period government spending is implicitly assumed to be completely ignored by the private sector in considering permanent personal disposable income the private sector is assumed to be forward looking in its assessment of income and taxation the stock of government debt is nevertheless included as part of the stock of private wealth the implicit assumption associate professor of economics graduate school of business university of chicago 1101 east 58th street chicago il 60637 i thank eugene fama levis kochin michael mussa paul evans and an anonymous referee for helpful comments i am particularly grateful to daniel benjamin for contributing many hours of discussion and laura lahaye who was a research assistant and valuable adviser on earlier drafts the theoretical debate on the burden of the debt has been long standing gerald o driscoll 1977 documents ricardo s nineteenth century position robert barro 1974 reopened the debate by introducing the fundamental issue of intergenerational transfers also discussed in merton miller and charles upton 1974 the empirical side of the debate was initiated by levis kochin s 1974 attempt to test for the effects of deficits on consumption and by martin feldstein s 1974 attempt to test for the effects of social security wealth on consumption other empirical contributions include jess yawitz and laurence meyer 1976 myself 1978 and j earnest tanner 1978 1979 with respect to the effects of government deficits and debt and barro 1978 michael darby 1979 and dean leimer and selig lesnoy 1982 with respect to social security wealth see also interesting recent papers by john seater 1982 who generates detailed tests of the effects of deficits and debt on consumption charles plosser 1982 who explores the effects of government spending and debt shocks on interest rates and feldstein 1982 who attempts tests similar to some in this paper see fn 29 2martin bailey s 1962 1971 development of the effects of government spending on private consumption and aggregate economic activity is the seminal contribution paul david and john scadding 1974 extend bailey s ideas and provide some supporting empirical evidence more recently willem buiter 1977 and myself 1978 developed models based on bailey s earlier work barro 1981 has an interesting paper on related issues see also david aschauer 1982 3the standard approach incorporates fiscal policy through the concept of personal disposable income and by including the stock of government debt as part of personal wealth see for example the empirical specification of albert ando and franco modigliani 1963 which has been the basis of most empirical consumption studies since and feldstein 1974 for one of the more influential papers based on the ando modigliani specification

what causes public assistance caseloads to grow this paper uses state panel data to investigate changes in public assistance caseloads through the end of the afdc program in 1996 with particular attention to the rapid increase in caseloads between 1990 and 1994 previous research has focused on total caseloads with attention to economic and policy variables and does a relatively poor job of explaining this caseload increase this paper utilizes a much richer set of control variables to investigate the causes of caseload change it separates afdc caseloads into three subcomponent programs separately investigating changes within the afdc up program afdc child only cases and the remaining core afdc cases with benefits paid to single mothers and their children and it explores whether this caseload rise was driven by changes in takeup rates versus in eligibility the results indicate a large unexplained rise in total afdc caseloads even with a very rich specification a good share of this is due to sharp increases in child only cases driven by program and demographic shifts to a lesser extent this rise was caused by the expansion of afdc up to all states these two factors explain half of the overall rise and all of the unexplained rise in afdc caseloads the remaining increase in core afdc cases benefits received by single mothers and their children is well explained within the model and is the result of economic demographic political and policy changes these variables appear to have increased eligibility among the core afdc population in the early 1990s during the economic slowdown takeup rates also increased during this time period but not by a large amount

welfare use when approaching the time limit time limits reduce caseloads directly by cutting off benefits after a time limited usage but may also provide families with an incentive to reduce welfare use in order to conserve their benefits both effects depend on the stock of remaining months of eligibility this is the first empirical study to incorporate information on this crucial determinant of takeup and eligibility under time limits accounting for the potential endogeneity of an individual s past use time limits are estimated to have decreased welfare use by 25 percent between 1996 and 2003 roughly one fifth of this reduction is due to behavioral responses

group strategy proofness in private good economies many salient rules to allocate private goods are not only strategyproof but also group strategy proof in appropriate domains of definition hence diminishing the traditional conflict between incentives and efficiency that is so for solutions to matching division cost sharing house allocation and auctions in spite of the substantive disparity between these cases in a general framework encompassing all of them we prove that the equivalence between the two forms of strategy proofness is due to an underlying common structure that transcends the many differences between the contexts and the mechanisms for which it holds jel c78 d44 d63 d71 d82

on the compassion of time limited welfare programs supporters of recent welfare reforms argue that time limits and other eligibility restrictions serve recipients we present a simple model of agents with present biased preferences to investigate the theoretical validity of this claim we first identify four types of outcome that describe the behavior of a present biased agent in the absence of time limits we then show that the behavioral consequences of time limits are contingent on which outcome characterizes the agent s behavior in the absence of time limits we show that under some conditions the imposition of time limits may improve the wellbeing of welfare recipients evaluated both in terms of long run time consistent utility and the periodone self s utility this benefit of time limits may come either from allowing the welfare eligible to start working earlier than they otherwise would or contrary to the intent of the reforms from allowing them to postpone working d 2002 elsevier b v all rights reserved

fiscal policy and the term structure abstract this paper investigates the empirical association between deficits in interest rates it extends the results in plosser 1982 to include the more recent experience the association between a measure of ex ante real rates and deficits is also considered the results largely corroborate the previous results first little or no association between real or nominal interest rates and deficits is found second output and to a lesser extent military spending are found to have a significant association with interest rates

do in work tax credits serve as a safety net we test the eitc s response to economic need using irs data we exploit differences in timing and severity of economic cycles across states because the eitc requires earned income there is a theoretical ambiguity in the credit s cyclicality we find higher unemployment leads to increased likelihood of eitc recipiency and in credit amounts received for married couples but has insignificant effects for single individuals the eitc s protective effects are concentrated among skilled workers the eitc mitigates income shocks for married couples with children and groups likely to have moderate earnings but does not for most recipients single parents with children

national debt savings and real interest rates in a neoclassical model with endogenous labour supply and knowledge based growth in this paper the interest rate effect of government deficit financing in neoclassical model with endogenous labour supply and knowledge based growth is examined it is shown that government deficits do not raise interest rates if consumption and leisure are good substitutes and there is a large spillover effect in knowledge creation jel classification e13 e60 h60 dette nationale epargnes et taux d interet reels dans un modele neo classique ou la croissance est fondcle sur la connaissance et l offre de travail endogmne ce memoire examine les effets sur le taux d interet du financement d un deficit gouvernemental dans un modele neo classique ou la croissance est fondee sur la connaissance et l offre de travail endogene on montre que les d6ficits gouvernementaux ne font pas croitre les taux d interet si la consommation et le loisir sont des biens substituts et qu il y a des effets extemes importants qui decoulent de la production de la connaissance

the market value and maturity structure of government of canada debt 1967 83 the market value and maturity structure of outstanding government of canada debt are calculated at monthly frequency for the 1967 to 1983 period the data are disaggregated into general public chartered bank and government holdings the time series behaviour of market value and par value measures are examined to determine whether par value is a reasonable approximation for market value market value data are also used to construct an alternative measure of the deficit flow which is compared with conventional measures of the deficit la valeur au marche et la structure d echeances de la dette du gouvernement du canada 1967 83 la valeur au marche et la structure d echeances de la dette du gouvernement du canada sont calculees par les auteurs pour chaque mois au cours de la periode de 1967 a 1983 on a ventile les resultats en portions detenues par le grand public par les banques a charte et par le gouvernement les auteurs examinent ensuite la chronique des mesures de valeurs au march6 et de valeurs au pair afin de determiner si la valeur au pair est une bonne approximation de la valeur au marche on se sert alors des donnees precisant la valeur au marche pour construire un indicateur de rechange du d6ficit qu on peut alors comparer aux mesures conventionnelles du deficit

on strategy proofness and symmetric single peakedness we characterize the class of strategy proof social choice functions on the domain of symmetric single peaked preferences this class is strictly larger than the set of generalized median voter schemes the class of strategy proof and tops only social choice functions on the domain of single peaked preferences characterized by moulin 1980 since under the domain of symmetric single peaked preferences generalized median voter schemes can be disturbed by discontinuity points and remain strategy proof on the smaller domain our result identifies the specific nature of these discontinuities which allow to design non onto social choice functions to deal with feasibility constraints

monetary independence under bretton woods perspectives from a stochastic maximizing model research based on the kouri porter 1974 model of international capital flows suggests that the central banks of nonreserve countries enjoyed considerable monetary independence during the bretton woods era this paper is a theoretical and empirical reassessment of this conclusion using a stochastic maximizing model it is shown that the existence of imperfect asset substitutability does not guarantee monetary control at the empirical level the estimated offset coefficients for four industrialized countries are consistent with zero monetary independence

do budget deficits raise nominal interest rates evidence from six countries abstract it is widely believed that budget deficits raise nominal interest rates this paper shows that the belief has no empirical support for six countries ricardian equivalence may explain the lack of a positive association between budget deficits and nominal interest rates

games the states don t play welfare benefits and the theory of fiscal federalism fiscal federalism theory predicts that states will behave strategically in welfare programs because voter demand for welfare is sensitive to tax price while the tax price itself changes because of welfare induced migration this paper tests these propositions on afdc in the united states for a panel from 1982 88 using new models for the determination of the recipiency ratio the tax price and composite neighbors the data do not support any substantial tax price elasticity of demand for welfare estimates of migration effects on tax price are found to be sensitive to specification copyright 1995 by mit press

does the availability of high wage jobs for low skilled men affect welfare expenditures evidence from shocks to the steel and coal industries abstract we study shocks to the coal and steel industries to measure the effect of long term changes in demand for low skilled workers on welfare expenditures the coal and steel industries have historically paid high wages to low skilled men we find a substantial increase in welfare expenditures in response to the collapse of the steel and coal industries in the 1980s and an even more substantial reduction in welfare expenditures during the coal boom of the 1970s additional analysis indicates the reduction in welfare expenditures during the coal boom is due in part to a decline in single parent households

government financing decisions and asset returns abstract this paper presents an empirical investigation of the relation between government financing decisions and asset returns in particular the focus is on whether a substitution of debt financing for tax financing of a given level of expenditures is associated with an increase in interest rates the paper brings a different perspective to empirical investigations of government fiscal policies by examining the response of asset prices in an efficient capital market to such policies rather than focusing on aggregate consumption behavior the results are consistent with the idea that asset prices are unrelated to how the government finances its expenditures the results however also indicate that the capital market is not indifferent with respect to the level of government expenditures as higher interest rates are associated with increases in government purchases

when do women use aid to families with dependent children and food stamps the dynamics of eligibility versus participation this paper investigates dynamic patterns in the relationship between eligibility and participation in the aid to families with dependent children afdc and food stamp programs using monthly longitudinal data from the survey of income and program participation the results indicate that there are many relatively short eligibility spells that do not result in program participation and end with increases in income participation is most likely to occur among women with lower current and future earnings opportunities and is affected by locational and policy parameters those who elect to participate in these programs tend to start receiving benefits almost immediately upon becoming eligible a substantial number of women exit these programs before their eligibility ends among at least some of these women it is likely that unreported changes in income are occurring in 1989 if all eligible single parent families had participated in afdc and food stamps benefit payments in these programs would have been 13 5 billion higher

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs