the importance of financial considerations in divorce decisions i introduction one of the most dramatic and commonly cited consequences of divorce is the fall in family money income especially for households headed by divorced women using the panel survey of income dynamics duncan and hoffman 1985 estimate that the family income of divorced and separated women fell by 19 percent during the year following divorce or separation a study by nestel et al 1983 using data from the mature women s cohort of the national longitudinal survey of labor market experience indicates that the poverty rate for households headed by women who were divorced during the survey and did not remarry rose from 10 percent just prior to divorce to 25 percent immediately after dovorce similar results are reported by mott and moore 1982 and espenshade 1979 these statistics however may overestimate the long term negative consequences of divorce because they ignore the possibility of an improvement in financial circumstances through remarriage 1 mott and moore 1982 find that even for women who do not remarry economic status improves over time due primarily to better employment prospects given the large financial costs of divorce especially in the short run it is reasonable to ask how important are financial considerations in divorce decisions this paper explores the linkages between the financial consequences of divorce and the decision to become divorced the paper extends previous work by measuring these consequences over a period of time rather than at one point in time in particular the paper addresses two issues 1 do the expected financial consequences of divorce affect the decision to become divorced and 2 what is the relative importance of short versus long run considerations a standard choice theoretic model predicts that the smaller are the financial costs of divorce the greater is the probability of divorce the financial opportunity cost of divorce is measured as the difference in the expected present values of the income streams within marriage and at divorce the expected income stream at divorce includes the financial value attached to a possible remarriage as well as income from employment welfare alimony and child support payments the empirical analysis utilizes data from the national longitudinal survey of work experience of young women nls a sample of those divorced between 1973 and 1978 is observed over time during marriage after divorce and for some during a remarriage thus the actual income changes resulting from divorce and remarriage are measured income changes for a sample of continuously married women are also measured over a comparable period the expected changes in income for each subsample are estimated as a function of socio economic variables and the values are imputed for the entire sample to explore the relationship between these expected income streams and decisions about divorce the result indicate that the expected short term financial consequences of divorce are a better predictor of subsequent divorce than are the longer term consequences this evidence implies that individuals behave as if they face high discount rates ii economic models of divorce one of the first economic models of divorce was developed and emphirically tested by becker landes and michael 1977 as in any choice theoretic model divorce occurs when the gains from that choice exceed the benefit from remaining married gains from marriage include both a pecuniary component such as pooled household income from the market work of the husband and wife and a non pecuniary component such as children love companionship and household goods from home production gains from divorce include own labor market income home production which may differ between the divorced and married states and the expected value of potential new relationship e g remarriage marriage specific capital such as children has a higher value within marriage and increases the opportunity cost of divorce

the incentive effects of medicaid on women s labor supply this paper investigates medicaid s impact on women s labor supply behavior while taking into account medicaid s link to the afdc program the data were extracted from the 1986 current population survey a majorfinding is that medicaid valued as government provided health insurance has a significant negative impact on an average female head s probability of working for instance a i0 percent increase in medicaid would reduce a head s probability of working by 9 to 1 3 percentage points contrary to expectations medicaid is found to have a generally insignificant effect on hours worked

turnover in the afdc population an event history analysis the control group of families with female heads from the denver income maintenance experiment is utilized in this analysis of afdc turnover this study uses event history techniques a methodology that is more appropriate for exploring welfare dynamics than the logit approach of earlier work increases in age and the wage have significant negative effects on the rate of entering afdc a higher guarantee raises this rate significantly age and the guarantee have significant effects with opposite signs on the exit rate other variables are not systematically related to turnover the estimates are applied to projected changes in lengths of time spent on and off afdc and in afdc caseloads due to changes in the explanatory variables

the effect of food stamps on labor supply a bivariate selection model abstract although there is a large literature on the effects of u s transfer programs on labor supply this is the first such study of the food stamp program we model the nonlinearity and nonconvexity of the budget constraint and use maximum likelihood methods to estimate hours of work functions for female heads of household the largest recipient group in the program we also model the joint response to afdc and food stamps and we account for the existence of a significant number of eligible households who do not participate in the programs a three equation bivariate selection model is estimated on a sample of eligible households with maximum likelihood

the effect of child support payments on the labor supply of female family heads an econometric analysis recent census bureau statistics show that women who receive child support payments have higher earnings and work longer hours than women who do not does this suggest that child support unlike all other nonwage income does not deter work effort or are women who receive it simply different we use 1979 1982 cps data on divorced or separated women to estimate the determinants of hours worked when afdc participation and child support are endogenous we find evidence of unobservable differences between women who receive child support and those who do not controlling for these both child support and other nonwage income appear to reduce hours worked but the deterrent effect of child support is considerably less

food insecurity and public assistance this paper examines if welfare programs reduce the probability that vulnerable households experience food deprivation because of financial constraints although the 1996 welfare reform legislation specifically limited the eligibility of immigrant households to receive assistance many states chose to protect their immigrant populations by offering state funded aid to these groups i exploit these changes in eligibility rules to examine the link between food insecurity and public assistance the evidence indicates that a 10 percentage point cut in the fraction of the population that receives public assistance increases the fraction of food insecure households by about 5 percentage points

incentives in government contracts abstract this paper is concerned with the structure of compensation schemes that a government might employ when contracting with a private firm we characterize the class of all compensation schemes that induce contracting firms to share their inside information with the government

household labor supply and welfare participation in sweden using a sample of swedish households we estimate a household labor supply model assuming that preferences for consumption and leisure can be described by a direct translog utility function the labor supply and welfare participation decisions are treated as a discrete choice problem and we assume that these choices follow a simple conditional logit rule in addition we allow unobserved individual specific effects to be correlated across alternatives we assume that these unobserved effects are drawn from a discrete distribution and the correlation across alternatives is modeled using factor loading techniques classification error in hours is allowed for by using a multiplicative measurement error specification the estimates from the structural model yield inelastic labor supply among husbands and positive wage elasticity for wives further the cross elasticities are close to zero

the medicaid notch labor supply and welfare participation evidence from eligibility expansions i assess the impact of losing public health insurance on labor market decisions of women by examining a series of medicaid eligibility expansions targeted toward young children these targeted expansions severed the historical tie between afdc and medicaid eligibility the reforms allowed a mother s earnings to increase without losing public health insurance for her young children increasing the income limit for medicaid resulted in a decrease in afdc participation and an increase in labor force participation among these women the effects were large for ever married women and negligible for never married women

how financial incentives induce disability insurance recipients to return to work using a local randomized experiment that arises from a sharp discontinuity in disability insurance di policy in norway we provide transparent and credible identification of how financial incentives induce di recipients to return to work we find that many di recipients have considerable capacity to work that can be effectively induced by providing financial work incentives we further show that providing work incentives to di recipients may both increase their disposable income and reduce program costs our findings also suggest that targeted policies may be the most effective in encouraging di recipients to return to work

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

a note on the antipoverty effectiveness of child support among mother only families the current population survey is used to examine the antipoverty effectiveness of child support social insurance and welfare among motheronly families in 1995 child support brought about 6 7 percent of pretransfer poor mother only families over the poverty line an effect similar to that of social insurance and welfare a brief trend analysis shows that child support s antipoverty effectiveness has been growing some potential reasons why child support s effect is still so small in the face of substantial changes in child support policy are hypothesized

public goods and minimum provision levels does the institutional formation affect cooperation we investigate experimentally the role of institutional formation on the implementation of a binding minimum contribution level to a public good groups either face the minimum level exogenously im

aggregate consumer behaviour and the measurement of inequality this paper presents an approach to inequality measurement based on an econometric model of aggregate consumer behaviour the novel feature of this model is that systems of individual demand functions can be recovered uniquely from the system of aggregate demand functions we present methods for evaluating social welfare based on an explicit social welfare function this social welfare function incorporates measures of individual welfare based on indirect utility functions for all consumer units we develop indexes of inequality based on actual and potential levels of social welfare

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

the wisconsin child support assurance system estimated effects on poverty labor supply caseloads and costs the economic impact of a child support assurance system csas is simulated with microdata on custodial families in wisconsin the csas includes a uniform child support standard automatic wage withholding a minimum child support benefit and wage subsidy for eligible families the simulation incorporates a model of the labor supply decision representing the custodial parent s choice of whether to participate in csas or in the current afdc system the results suggest that csas can significantly reduce poverty as well as welfare caseloads if child support collections increase by one half of the difference between estimated ability to pay child support and current collections csas will be less costly than the current system

coalition stability in public goods provision testing an optimal allocation rule we test the canonical model of international environmental agreements ieas in a laboratory setting with asymmetric agents iea participation represents coalition formation and public good provision where there are gains to cooperation but an incentive to free ride we test four competing methods of dividing the coalition s worth a recently proposed optimal rule which accounts for subjects payoffs as a single free rider the shapley value the nash bargaining solution and an equal split each treatment generates the theoretically predicted coalition size more often than not the shares of the potential gains to cooperation achieved by each rule are 51 36 40 and 13 respectively these results highlight the importance of using an optimal rule to improve ieas and more broadly for voluntary public good provision

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

work and welfare as determinants of female poverty and household headship this paper formulates and estimates a model of the determinants of female household headship headship responds to variations in the levels of well being a woman can expect if she marries or if she heads her own household the authors measure the opportunity cost of female headship and the effects of welfare benefits and womens work in the market on female headship and poverty they find that if welfare benefits were reduced there would be small reductions in the proportion of women heading households for whites and nonwhites but a substantial increase in poverty for nonwhites they also find that wives work in the market reduces poverty and female headship for nonwhites and reduces poverty but increases headship for whites the study is based on 1975 u s data excerpt

the efficiency of capital allocation in this paper we present an intertemporal general equilibrium model of the u s economy the purpose of this model is to analyze the efficiency of capital allocation we have implemented our model econometrically for annual data covering the period 1955 80 the model encompasses the critical features of u s tax laws applicable to income from capital equilibrium is determined by market clearing conditions for consumption and investment goods and for capital and labor services in each time period under perfect foresight there exists a unique balanced growth equilibrium corresponding to any stationary tax policy an intertemporal general equilibrium model of the u s economy is presented in this paper the purpose of this model is to analyze the efficiency of capital allocation the model is kindred in spirit to the model of the swedish economy developed by ragnar bentzel 1978

an employment approach to urban poverty alleviation employment patterns of afdc recipients the milwaukee experience 1989 93 major changes are underway in the american programme to aid mothers with dependent children one major component of the proposed changes is a work requirement for mothers to begin to explore what problems and opportunities may be created by a work requirement this paper explores several questions related to the work and earnings experience of a cohort of 42 000 aid recipients in an urban county among the several findings is the fact that about 70 per cent of the welfare recipients have recent work experience for some the experience is limited for others especially those known to have left welfare it is extensive the earnings produced from work range from basically pocket change to well in excess of us 16 500 per year the implications for policy changes vary with one s perspective what is clear is that some recipients can earn more than welfare for others such earnings will be more difficult

estimating and testing a model of welfare participation the case of supplementary benefits in britain evidence of incomplete participation in welfare programmes is often displayed this paper analyses how such apparent failures to participate can be explained by the presence of random errors in assessing benefit eligibility by income underreporting by benefit misreporting and by participation costs we apply the model to the receipts of supplementary benefits in britain a bivariate extension of the use of generalized residuals in testing the robustness of limited dependent variable models is provided and fails to reject a number of our stochastic assumptions

crowd out and diversity abstract research has shown that altruism is lower in diverse communities can this phenomenon be counteracted by government intervention to answer this question this paper introduces diversity to the canonical model of warm glow giving diversity may have two effects on incentives it may attenuate individuals altruistic preferences for public goods and it may cool off the warm glow that individuals get from voluntarism either of these effects leads to diverse communities having lower levels of public goods consistent with prior research however these effects have opposite implications for the efficacy of government intervention i then empirically investigate whether government intervention is more effective in diverse communities for identification i exploit the supreme court mandated 1991 expansion of the ssi program using a new dataset of united methodist churches from 1984 to 2000 the results show that the expansion of ssi crowded out charitable spending by churches the crowd out estimate for the average church is reasonably large but this masks significant differences in crowd out between communities crowd out occurred almost entirely in relatively homogeneous communities there is only modest evidence of crowd out in racially diverse communities thus diverse communities while having the lowest levels of altruism are in this instance the most amenable to government intervention

approaches to efficient capital taxation leveling the playing field vs living by the golden rule this paper analyzes intersectoral and intertemporal efficiency effects of the tax reform act of 1986 using a general equilibrium model that considers impacts of taxes on the allocation of capital across industries assets sectors and time the model pays close attentiona to capital adjustment dynamics we find that the 1986 reform worsened the intertemporal efficiency of resource allocation by increasing marginal effective tax rates on various uses and types of capital this negative efficiency effect is more that offset however by postivie effects from an improved intersectoral allocation of capital and a reduction of labor market distortions

the effect of expanding medicaid eligibility on supplemental security income program participation abstract low income adults without dependent children have historically had few paths to obtain public health insurance unless they qualified for supplemental security income ssi cash benefits because of a disability however in states that expand their medicaid programs childless adults may obtain medicaid without undergoing an intensive ssi disability review process and with substantially higher income and assets than the ssi program allows this expanded availability of medicaid coverage independent of ssi participation creates an opportunity to increase earnings and savings without jeopardizing health insurance coverage in this paper we use the natural experiments created by state decisions to expand medicaid to nondisabled nonelderly adults without dependent children to study the effect of decoupling medicaid eligibility and cash assistance using a difference in differences study design we collected data on the income eligibility limits enrollment caps and coverage characteristics of state medicaid expansions to childless adults from 2001 to 2013 we combine these data with the nationally representative american community survey to estimate the effects of state expansion on ssi participation we find relative declines in ssi participation of 0 17 percentage points on average after the introduction of medicaid coverage for childless adults a 7 relative decrease this finding suggests the potential for small but important efficiency gains from separating ssi and medicaid eligibility

voluntariness and efficiency in the provision of public goods abstract this paper presents a characterization of lindahl allocations which makes no reference to personalized prices lindahl equilibria are characterized here by two conditions pareto efficiency and a voluntariness condition voluntariness requires that no consumer may benefit from a reduction in his contribution if this means that the vector of public goods must be reduced in the same proportion the intersection of the large set of voluntary allocations and that of efficient ones turns out to be under differentiability the set of lindahl allocations

the impact of burden sharing rules on the voluntary provision of public goods abstract we investigate how burden sharing rules impact the voluntary provision of a public good which generates heterogeneous benefits to agents we compare different rule based contribution schemes where agents can first suggest a minimum provision level of the public good before the smallest common denominator is implemented we find that rule based contribution schemes significantly increase payoff levels relative to the vcm while significant differences exist between the rules importantly the equal payoff rule maximizes payoffs for all player types this also holds relative to a scheme where different types of players separately can determine their minimum contribution levels our results lend insights into the efficient institutional design for voluntary private provision of public goods and how burden sharing rules interact with efficiency when agents are heterogeneous

the impact of ceta programs on earnings a review of the literature this paper reviews and assesses evaluations of the comprehensive employment and training act ceta programs most of the studies found that the programs raised earnings by 200 to 600 annually in current dollars the programs were found to be more effective for women than men and public service employment and on the job training were generally found to be more effective activities than classroom training and work experience in spite of the broad overall agreement the studies differed significantly in many of their specific impact findings the nonexperimental nature of the data required the studies to make specific assumptions about selection procedures used to determine which individuals received training and the results are sensitive to the specific measures adopted data limitation and the inability to adequately test the validity of selection processes assumed make it impossible to determine which studies modeled the process correctly

the impact of fiscal incentives on student disability rates abstract in this paper i estimate the elasticity of student disability rates with respect to the generosity of state reimbursements the classification response is identified from policy induced variation in the amount of state aid generated by serving a disabled student across local school districts in texas from 1991 1992 through 1996 1997 my central estimates imply that fiscal incentives can explain nearly 40 of the recent growth in student disability rates in texas the magnitude of the institutional response varies by district size and enrollment concentration student race ethnicity and the level of fiscal constraint

the american welfare system and family structure an historical perspective cross sectional studies find a positive relationship between a state s welfare benefits and single motherhood but is this evidence of a welfare effect or rather of cross state differences in social attitudes that influence both policy and behavior this paper demonstrates that the spatial variation in welfare policy long preceded the spatial correlation of policy and behavior undermining the social norm hypothesis but the findings also raise doubts about the role that welfare policy played in the changes in family structure over the century the correlation between welfare benefits and family structure only appears in 1970 and then only for whites

health insurance eligibility utilization of medical care and child health two economists applied data from the current population survey and the national health interview survey and state level data on child mortality to a simulation model of utilization of medical care that varies only with the states legislative environment to examine the utilization of medical care and health effects of medicaid eligibility on low income children the models took into consideration the recent expansions of medicaid to low income children 38 of those ineligible for medicaid in 1984 who became eligible due to changes during 1984 1992 were uninsured between 1984 and 1992 expansions of the medicaid program increased the proportion of children eligible for medicaid almost two fold 16 1 vs 31 2 yet coverage rates were always lower than eligibility rates 13 2 vs 16 1 in 1984 and 20 3 vs 31 2 in 1992 and the increase in coverage rates was only about 50 of the increase in eligibility rates during 1984 1992 the probability that a child was eligible for medicaid increased the probability of health insurance coverage by 29 77 when the model considered bias in variables e g a recession in a state the take up rate was only 22 73 nevertheless medicaid markedly increased use of medical care for example eligibility for medicaid increased the likelihood of making a visit to a physicians office in the last two weeks by about 50 it also increased the probability of a child visiting the hospital suggesting inefficiency in the way that providers deliver care to medicaid enrollees medicaid eligibility had a significant effect on reducing child mortality the 15 1 percentage point increase in eligibility during 1984 1992 reduced child mortality by 4 5 when the researchers examined parent assessed subjective health measures medicaid eligibility had no effect on child health medicaid eligibility reduced race and education based disparities in the number of visits and racial differences in mortality yet it may actually intensify current disparities in health care delivery site

welfare comparison under exact aggregation new econometric model of aggregate consumer behavior in the united states and to apply this model to the analysis of impacts of alternative economic policies on the welfare of individual consuming units the model incorporates time series data on quantities consumed prices the level and distribution of income and demographic characteristics of the population it also incorporates cross section data on the allocation of consumer expenditures for households with different demographic characteristics our econometric model is based on the theory of exact aggregation developed by lau 1977a c this theory makes it possible to dispense with the notion of a representative consumer in constructing models of aggregate consumer behavior one of the most remarkable implications of lau s theory of exact aggregation is that systems of demand functions for individuals with common demographic characteristics can be recovered uniquely from the system of aggregate demand functions using the individual demand functions we can analyze the impact of economic policy on consumer welfare

federalizing benefits the introduction of supplemental security income and the size of the safety net abstract in 1974 supplemental security income ssi federalized cash welfare programs for the elderly blind and individuals with disabilities imposing a national minimum benefit and differentially raising payment levels in states that paid below its benefit floor we show that this increased disability participation but shrank non disability cash transfer programs for every four new ssi recipients three came from other welfare programs each dollar of per capita ssi income increased total per capita transfer income by just over 50 cents federalizing part of a patchwork safety net need not increase redistribution by as much as traditional models of fiscal federalism suggest

the efficiency gains from dynamic tax reform this paper presents a new simulation methodology for determining the pure efficiency gains from tax reform along the general equilibrium rational expectations growth path of life cycle economies the principal findings concern the effects of switching from a proportional income tax with rates similar to those in the u s to either a proportional tax on consumption or a proportional tax on labor income a switch to consumption taxation generates a sustainable welfare gain of almost 2 percent of lifetime resources in contrast a transition to wage taxation generates a loss of greater than percent of lifetime re sources a second general result is that even a mild degree of progressivity in the income tax system imposes a very large efficiency cost this abstract was borrowed from another version of this item

the implications of current policies on the production of infant health this study examines the possible link between the current trend to reduce availability of abortion services and the incidence of low birthweight births using current data on births and abortions in atlanta and new york city we update and expand the earlier empirical results of grossman and joyce the journal of political economy 1990 98 5 98 1007 using their latent variable model framework we find some evidence for the cost of abortion model which assumes that increasing the full costs of abortion will be associated with more low birthweight hence less healthy infants these results indicate that current trends towards the reduction of funding for various social services could exacerbate the problem of low birthweight

an international policy architecture for the post kyoto era in february 2005 the kyoto protocol to the united nations framework convention on climate change came into force but without participation by the united states its impacts on emissions of greenhouse gases including carbon dioxide co2 the primary anthropogenic driver of climate change will be trivial but scientific robert t watson 2001 and economic charles d kolstad and michael a toman 2001 analyses point to the need for a credible international approach because the kyoto protocol s ambitious targets apply only to the short term 2008 2012 and only to industrialized nations the agreement will impose relatively high costs and generate only modest short term benefits while failing to provide a real solution joseph e aldy et al 2003 for these reasons most economists see the agreement as deeply flawed richard n cooper 1998 david g victor 2001 warwick j mckibbin and peter j wilcoxen 2002 although some see it as an acceptable first step axel michaelowa 2003 virtually all agree however that the protocol is not sufficient to the overall challenge we describe the basic features of a postkyoto international global climate agreement which addresses three crucial questions who when and how the respective elements are first a means to ensure that key nations industrialized and developing are involved second an emphasis on an extended time path of action employing a cost effective pattern over time and third inclusion of market based policy instruments i who expand participation to include all key countries

the marginal propensity to earn and consume out of unearned income evidence using an unusually large cash grant reform in this paper we use the rapid introduction of an unconditional cash grant child support in south africa to estimate the marginal propensity to consume and earn out of unearned income we find that the marginal propensity to earn is about 0 3 and that the marginal propensity to consume is about 0 7 nothing of the grant appears to be saved if anything households dissave against future grant payments the marginal propensities estimated here are similar to those reported in comparable papers using us data however they stand in contrast to some results on conditional cash transfers in other developing countries

the effect of disability payments on household earnings and income evidence from the ssi children s program abstract i estimate the effect of removing children with disabilities from supplemental security income ssi on parental earnings and household disability receipt using administrative data from the social security administration ssa i implement regression discontinuity and differencein differences designs based on changes in ssa s budget for child medical reviews i find that parents fully offset the ssi loss with increased earnings and the loss of the child s ssi payment reduces disability applications by parents and siblings but does not reduce their actual disability receipt i examine alternative hypotheses for the large parental earnings response

tax policy and capital allocation summary the purpose of this paper is to analyze the impact of u s tax policy on the efficiency of capital allocation to achieve this objective we employ an intertemporal general equilibrium model of the u s economy implemented econometrically for annual data covering the period 1955 1980 we present a detailed model of the provisions of u s tax law applicable to income from capital we use intertemporal equilibrium paths corresponding to alternative tax policies to evaluate proposals for tax reform we find that dramatic gains in economic welfare would result from a shift from direct to indirect taxation

welfare dependence concepts measures and trends in the past ten years discussions of the welfare system and welfare reform have increasingly been concerned with the extent of welfare dependence however while the idea that some individuals may be dependent upon the welfare system for support is intuitively clear the concept of welfare dependence is rather ill defined our aims in this paper are to clarify what is meant by welfare dependence to discuss the implications for data handling measurement and statistical modeling and to present new results on the level and trend in welfare dependence in the united states

explaining and forecasting results of the self sufficiency project this paper studies the self sufficiency project ssp a controlled randomized experiment concerning welfare by estimating a model of endogenous skill accumulation multidimensional job opportunities and time varying opportunity costs of labour market time methods for estimating dynamic programming models with unobserved heterogeneity are extended to account for unexpected policy interventions and endogenous sample selection and initial conditions parameters are identified and consistently estimated by imposing optimal responses to the exact form of the ssp earnings supplement and the experimental program which induces exogenous variation between treatment groups and within groups as treatment progresses the estimated model tracks primary outcomes well in and out of sample except for underestimating trends in the sample of new welfare applicants predictions from counterfactual experiments run counter to non structural results reported elsewhere and they suggest that details of the ssp s design are critical for interpretation of results the separate ssp plus treatment may have longer lasting and more generalized impacts than the in sample impacts suggest copyright oxford university press

incentives for the identification and treatment of children with disabilities the supplemental security income program abstract this paper examines how supplemental security income ssi benefit availability and generosity affect the probability that families identify health problems in their children and move onto the ssi rolls first i observe that a liberalization of ssi eligibility in 1990 was followed by a substantial re evaluation of the health status of low income children by their parents then i find that increases in ssi benefits raise the likelihood that a family identifies a chronic impairment in their child my results indicate that cash assistance targeted on children with disabilities promotes the detection and treatment of medical problems in low income children

taxes and transfers their effects on the decision to end a marriage abstract the transfer system typically has large marriage disincentives while the income tax system is likely to subsidize marriage for many low income families in other words the tax system may offset an increase in transfer benefits associated with marital separation the interaction of the transfer system with the income tax system has largely been overlooked the income tax system has become more relevant for low income families with the recent expansion of the earned income tax credit which filers may be eligible for even if their tax liability is zero this paper uses family level measures of the change in transfer benefits and tax liability associated with a change in family structure to consider the effect of these financial incentives on separation decisions

the incidence of taxes a dynamic macroeconomic analysis abstract this paper analyzes the incidence of various tax changes using the intertemporal optimizing framework developed by brock and turnovsky the model contains a reasonably complete specification of the corporate sector in which firms have the choice of financial structure it also allows for a range of government financial policies although only one is considered in detail both the short run and the long run effects of changes in the personal income capital gains and corporate profit tax rates are analyzed it is shown that the effects of tax changes a vary between the short and long run b the effects of tax changes depend critically upon the financial structure adopted by forms and c may also depend upon government financial policy

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

an untold story the characteristics of welfare use in british columbia the dynamics of welfare participation are analyzed using a unique longitudinal data set derived from provincial administrative records over the period 1980 92 the principal findings are that the majority of welfare spells are experienced by single men and women without children and that while most welfare spells are short there is a high incidence of recidivism although continuous long term use and dependence on welfare is not characteristic of most recipients experiences the program does not provide an effective route to financial independence since most users periodically return to the program

in kind transfers and work incentives recent developments in rationing theory are used to examine the differences between the effects of in kind and cash transfers on labor supply it is not possible to tell a priori which type of transfer will cause the greater reduction in hours of work the answer depends on the extent to which in kind transfers distort consumption choices and on the relationship between the transferred commodities and leisure hicks allen complements can cause greater reductions in labor supply than equally generous cash transfers while strong hicks allen substitutes can induce increases in market work

dynamic hours of work functions for husbands wives and single females hours of work equations are derived from the constrained maximization of a utility function that is not separable over time and that varies with a household s demographic structure these equations are fitted to observations on wage rates nonlabor income and other variables for husbands wives and unmarried women the dependence of each household s current work and consumption behavior upon its work and consumption behavior in the past is examined closely and different interpretations of the relationship are confronted with the data

disability transfers self reported health and the labor force attachment of older men evidence from the historical record we use trends in self reported disability to gauge the impact of the growth of disability transfer programs on the labor force attachment of older working aged men our tabulations suggest that between 1949 and 1987 about half of the 4 9 percentage point drop in the labor force participation of men aged 45 54 and between one quarter and one third of the 19 9 point drop among men aged 55 64 represented a movement of men out of the labor force and onto the rolls of transfer programs targeted at the disabled since the expansion of transfer programs represents only one of the forces behind this movement these figures represent upper bounds on the impact of such programs on work force attachment

the effect of welfare programs on criminal behavior a theoretical and empirical analysis a simple economic model of criminal behavior shows that welfare payments will reduce the time allocated to illegal activities under risk aversion and other reasonable assumptions this theoretical prediction is confirmed by the empirical findings using a set of cross sectional u s state data for 1987 it is found that cash or in kind welfare programs have a negative and often significant effect on property crime more general programs such as public housing seem to have a larger effect than those aimed primarily at women afdc medicaid and school lunch programs apparently have little effect on property crime

choosing rules to govern the commons a model with evidence from mexico abstract i develop a model to assess distributive rules observed in field data on 48 mexican farmer managed irrigation systems households decide whether to contribute maintenance effort the aggregate amount of which affects the level of output distributive rules with congruence between the sharing of collective costs and benefits elicit the highest level of effort empirically however incongruent rules dominate the surveyed systems i argue that transaction costs offset some efficiency benefits of congruent rules i estimate a model of rule choice inequality and the age of the water users association strongly increase the likelihood that a system chooses proportional water allocation

aching to retire the rise in the full retirement age and its impact on the social security disability rolls abstract the social security amendments of 1983 reduced the generosity of social security retired worker benefits in the u s by increasing the program s full retirement age from 65 to 67 and increasing the penalty for claiming benefits at the early retirement age of 62 these changes were phased in gradually so that individuals born in or before 1937 were unaffected and those born in 1960 or later were fully affected no corresponding changes were made to the program s disabled worker benefits and thus the relative generosity of social security disability insurance ssdi benefits increased in this paper we investigate the effect of the amendments on ssdi enrollment by exploiting variation across birth cohorts in the policy induced reduction in the present value of retired worker benefits our findings indicate that the amendments significantly increased ssdi enrollment since 1983 with an additional 0 6 of men and 0 9 of women between the ages of 45 and 64 receiving ssdi benefits in 2005 as a result of the changes our results further indicate that these effects will continue to increase during the next two decades as those fully exposed to the reduction in retirement benefit generosity reach their fifties and early sixties

a problem with the negative income tax abstract the goal of a negative income tax is to increase the work incentives of welfare recipients this note points out that it may not do so and empirical simulations show that this is a real world possibility

marriage and divorce informational constraints and private contracting the relationship between divorce rates in the united states and laws regulating divorce are analyzed using data from a special current population survey undertaken in 1979 with particular reference to the adoption by many states of no fault divorce laws the author utilizes a contract theoretic framework to examine the impact of both legal and informational constraints on several aspects of the marriage relationship 1 the probability of divorce 2 compensation at divorce i e the terms of the divorce settlement 3 the probability of entering marriage and 4 incentives for investment in marriage specific capital two different models are developed the first assumes that ex post information about the value of each spouses opportunites at divorce is symmetric and that since divorce would only occur if the joint benefits outweigh the joint costs the law has no effect on the divorce rate the second model asserts that the existence of asymmetric information results in a fixed wage marriage contract and that divorce would be higher in states that allow unilateral divorce the evidence supports the first of these hypotheses excerpt

modeling production for general equilibrium analysis the purpose of this paper is to present econometric models of producer behavior suitable for incorporation into a general equilibrium model implementation of these models requires a time series of inter industry transactions tables second implementation requires methods for estimation of parameters in systems of nonlinear simultaneous equations finally the economic theory of producer behavior implies equality and inequality restrictions on the parameters that must be incorporated into the estimation we discuss an empirical application to modeling producer behavior in thirty six industrial sectors of the u s economy

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

the elasticity of taxable income evidence and implications abstract a central tax policy parameter that has recently received much attention but about which there is substantial uncertainty is the overall elasticity of taxable income we provide new estimates of this elasticity which address identification problems with previous work by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s this identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income and on variation in the elasticity of taxable income by income group we find that the overall elasticity of taxable income is approximately 0 4 the elasticity of real income not including tax preferences is much lower we estimate small income effects of tax changes on reported income implying that the compensated and uncompensated elasticities of taxable income are very similar we estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above 100 000 per year who have an elasticity of 0 57 while for those with incomes below 100 000 per year the elasticity is less than one third as large moreover high income taxpayers who itemize are particularly responsive to taxation our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers

determinants of collective action on the local commons a model with evidence from mexico i develop a model of cooperation in small irrigation systems i give conditions under which an equalizing redistribution of wealth increases the level of equilibrium cooperation but also show that some redistributions that increase inequality can also increase cooperation the distributive rule a combination of arrangements for maintenance cost sharing and water allocation also affects the cooperation level i estimate statistical models of cooperation for three maintenance indicators using field data from a study of mexican irrigation societies social heterogeneity and landholding inequality are significantly associated with lower maintenance distributive rules that allocate water proportionally to landholding size likewise reduce maintenance

welfare and child health the link between afdc participation and birth weight the stated goal of the aid for families with dependent children program is to improve the well being of children in poor families the program has come under considerable attack in recent years from critics who argue that participation in afdc is associated with maternal behaviors that are bad for children we investigate this question using birth weight as a measure of child health we find that participation in afdc during pregnancy is associated with delays in obtaining prenatal care smoking and drinking during pregnancy younger maternal age at the birth and ultimately with lower birth weights even when observable characteristics of the mother are controlled for however we show that when unobservable characteristics of the mother are controlled for there is actually a positive association between participation in afdc and the birth weights of children of white women from poor families we find no association between birth weight and maternal participation in afdc among black children

the effect of educational attainment on welfare dependence evidence from canada abstract the impact of educational attainment on the duration of welfare spells is analysed using a unique data set derived from the administration of the social assistance program in canada over the period 1986 1993 the empirical analysis includes controls for demographic characteristics program parameters labour market conditions and unobserved individual characteristics it is found that that educational attainment has a much greater impact on the welfare exit rate for women than for men additionally the welfare exit rate for women is more sensitive to family status and program benefits but less sensitive to the unemployment rate relative to that for men

the welfare cost of capital income taxation in a growing economy the welfare cost of capital income taxation is analyzed in a general equilibrium framework where the private sector is represented by a competitive household endowed with perfect foresight and an infinite life the value of the welfare cost depends essentially on the elasticity of substitution between capital and labor in the production function numerical estimates are presented for different values of the parameters of the model the welfare gain obtained by the abolition of the capital income tax is smaller when the private sector is not endowed with perfect foresight it is reduced by about 40 percent when expectations are myopic the allocation efficiency cost of the corporate tax dwarfs the intertemporal welfare cost

afdc ssi and welfare reform aggressiveness caseload reductions versus caseload shifting welfare reform has made receipt of cash benefits more difficult and less attractive for single mothers we examine whether reforms of afdc affected caseloads of another program supplemental security income ssi we exploit state variation in welfare reform over time and find that female headed households in states aggressively pursuing welfare reform were 21 6 percent more likely to receive ssi this implies that a decrease in caseloads in one program cannot be interpreted as an equal sized decrease in the number of families receiving public assistance in addition our results have policy implications for the well being of families affected by welfare reform time limits

voluntary provision of a public good and individual morality abstract we examine both in general games in strategic form and in games of voluntary provision of a public good some implications of the assumption that individuals may obey ethical codes of conduct the notion of morality considered captures the intuition often attributed to kant that a moral action leads to the best outcome when it is properly universalized we propose a formalization of this idea which generalizes earlier attempts made in this direction in the literature by allowing the players to differ both in their strategy sets and their preferences we show that it is easy to find examples of games in which no moral behavior of this type exists or where the only existing kantian code of conduct leads to a pareto inefficient outcome we then more specifically examine the issues of existence and pareto efficiency of kantian norms of behavior in games of voluntary provision of a public good we find in this context that there is no conflict between morality and pareto efficiency since any kantian norm of behavior is pareto efficient we also prove the existence of a kantian norm of individual contribution

the impact of economic conditions on participation in disability programs evidence from the coal boom and bust abstract we examine the impact of the coal boom of the 1970 s and the coal bust of the 1980 s on disability program participation these shocks provide clear evidence that as the value of labor market participation increases disability program participation falls for the disability insurance program the elasticity of payments with respect to local earnings is between 0 3 and 0 4 and for supplemental security income the elasticity is between 0 4 and 0 7 consistent with a model where qualifying for disability programs is costly the relationship between economic conditions and program participation is much stronger for permanent than for transitory economic shocks

the effect of the u s welfare system on marital status abstract an issue of long standing importance in the u s welfare system has been its lack of neutrality with respect to family composition which generally provides payments only to female headed families that is families with no able bodied male present using data from 1969 to 1985 to examine the issue this study finds that 1 the simple cross sectional correlations between marital status and welfare benefits are almost always in the expected direction but are generally weak in significance 2 that the magnitude and significance of the correlations have nevertheless grown over time and 3 that the correlations for men are no weaker and usually stronger especially for blacks than those for women

does welfare inhibit success the long term effects of removing low income youth from the disability rolls i estimate the effects of removing low income youth with disabilities from supplemental security income ssi on their earnings and income in adulthood using a regression discontinuity design based on a 1996 policy change in age 18 medical reviews i find that youth who are removed from ssi at age 18 recover one third of the lost ssi cash income in earnings ssi youth who are removed and stay off ssi earn on average 4 400 annually and they lose 76 000 in present discounted observed income over the 16 years following removal relative to those who do not receive a review jel i30 i38 j14 supporters of welfare programs defend them as vital lifelines for those who face barriers to work while critics charge that these programs create perverse incentives to qualify and perpetuate dependency encapsulating this debate is the controversy over the us supplemental security income ssi program a program that provides cash payments and medicaid eligibility to low income children and adults with disabilities and the aged elderly after three decades of rapid expansion ssi is now the largest nonwork based cash welfare program in the united states paying about 50 billion each year to 8 million recipients including 1 3 million children 1 ssi has been singled out by policymakers and the media for potential perverse incentives

the impact of stricter criteria for disability insurance on labor force participation this paper studies the effect of a large scale policy change in the austrian disability insurance program which tightened eligibility criteria for men above a certain age using administrative data on the universe of austrian private sector employees the results of difference in difference regressions suggest a substantial and statistically significant decline in disability enrollment of 6 to 7 4 percentage points and an increase in employment of 1 6 to 3 4 percentage points the policy change had important spillover effects into the unemployment and sickness insurance program specifically the share of individuals receiving unemployment benefits increased by 3 5 to 3 9 percentage points and the share receiving sickness insurance benefits by roughly 0 7 percentage points

participation and commitment in voluntary coalitions to provide public goods this paper reports experimental evidence on the voluntary formation of coalitions to provide a public good participation and commitment in a coalition are either exogenously imposed or endogenously determined by the players themselves we find larger voluntary participation rates when commitments in the coalition are endogenously determined using a minimum contribution rule rather than exogenously determined however due to a trade off between participation and commitment coalitions with voluntary participation are less effective in facilitating cooperation compared to when all players are forced to participate this paper therefore confirms the rather pessimistic conclusions from coalition formation theories

equity fairness and lindahl equilibria abstract the purpose of this paper is to establish a criterion of justice called l fairness for an economy with public goods the concept of l fairness is set up in such a way as to extract the ethical judgement from lindahl s equilibrium concept then it is shown that the lindahl equilibria are qualified as l fair that is any lindahl equilibrium net trade is strongly l fair and conversely any strongly l fair net trade must be a lindahl equilibrium net trade as a corollary to this proposition it is also shown that any lindahl equilibrium allocation with equal wealth is strongly l fair and conversely that any strongly l fair allocation has to be that of lindahl equilibrium with equal wealth

why did the ssi disabled program grow so much disentangling the effect of medicaid the number of participants in the ssi program grew by 1 1 million from 1987 to 1993 this paper examines the role of medicaid on the ssi participation decision i use the rapid growth in average medicaid expenditure as a proxy for its value ols estimates of medicaid s effect may be biased because of omitted variables bias and measurement error i therefore apply two stage least squares to estimate medicaid s effect using average medicaid expenditure for blind ssi recipients as an instrument these estimates show that rising medicaid expenditure significantly increased ssi participation among adults with low permanent incomes explaining 20 of the growth

policy watch proposals for time limited welfare this paper summarizes the clinton administration s welfare reform proposal and views the available evidence on the effects of time limiting cash assistance and requiring work among long term aid to families with dependent children users the reforms are designed to increase employment among aid to families with dependent children recipients given changes in the labor market for less skilled workers it is not clear that this will increase income among these families the reform proposals would shift antipoverty spending toward work subsidies child support collection efforts and subsidized jobs that support mandated employment it is unclear that this will produce either a cheaper or more effective antipoverty system than the current one

estimation with response error and nonresponse error in survey data originates from failure to contact the sample and from false answers to verifiable questions these errors may be systematic and associated with uncooperative or unreliable respondents zabel modeled attrition in the survey of income and program participation and found systematic demographic and design effects bollinger and david modeled response error and identified correlations to income per capita in this analysis we link missing interviews in a panel and response error through a trivariate probit analysis robustness of the correlation between attrition and response error is examined by comparing variants of the model the joint model of response error and attrition becomes the first stage of a pseudolikelihood estimate of a model of food stamp participation the model is significantly different from naive probit on the survey data

locational choice of afdc recipients within california a conditional logit analysis abstract this paper examines factors that influence migration of afdc recipients within california a county level conditional logit model is used to analyze the impact of cost adjusted benefits on intrastate moves during recipients first year of welfare participation costs of living particularly housing costs differ considerably across counties of california yet the welfare benefit is set at the state level this creates the potential for variation in the purchasing power of the welfare benefit if a family chooses to move variation in cost of living is shown to have a significant effect on migration patterns of afdc recipients estimates suggest that a 150 decrease in fair market rent results in 15 more migration to the county recipients migration is more responsive to cost of living than migration of the general population