The Labor Supply of Female Household Heads, or AFDC Work Incentives Don't Work Too Well

Abstract

This paper presents an approximate method for estimating the labor supply function of female household heads who may or may not be receiving Aid to Families with Dependent Children (AFDC). Estimation results indicate that any AFDC parameter change which increases a program's breakeven income will reduce expected hours of work in the population. In particular, liberalized work incentives may encourage current recipients to increase labor supply, but these increases will be more than offset by work reductions of former nonrecipients who are now attracted onto the program.

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