The Demand for Welfare Generosity

David Christopher Ribar · Mark Ottoni–Wilhelm

63 citations0/0 files storedThe Review of Economics and Statistics

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Gender, Labor, and Family Dynamics Social Policy and Reform Studies Politics, Economics, and Education Policy

Abstract

This paper estimates economic models of the determinants of state benefit levels in the Aid to Families with Dependent Children (AFDC) program using 1969–1992 data. These models have been extensively researched; however, the existing literature has produced an unacceptably wide range of estimates. Using alternative econometric procedures, this paper systematically examines both the specification assumptions underlying previous analyses as well as several additional specification issues. It is, therefore, able to replicate and reconcile estimates from previous studies and to provide updated, consensus estimates of the demand for welfare generosity. It finds that changes in the average level of income within states have small but statistically significant positive effects on benefits with the confidence bounds on the elasticity extending from 0.11 to 0.82. Changes in the effective price of redistribution are found to have, at most, weak negative effects with elasticities in the range of -0.14 to 0.02. These results are used to evaluate the effects of block grant provisions in the recently enacted welfare reform legislation.

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References

1974A Theory of Social Interactions 1974A Theory of Social Interactions 2002Pareto Optimal Redistribution 1985A Politico-Economic Theory of Income Redistribution 1976Income Transfers as a Public Good: An Application to AFDC 1984Migration and Income Redistribution Responsibilities

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2011ETHNIC DIVERSITY, PUBLIC SPENDING, AND INDIVIDUAL SUPPORT FOR THE WELFARE STATE: A REVIEW OF THE EMPIRICAL LITERATURE 1998The decline of welfare benefits in the U.S.: the role of wage inequality 1998Fiscal Effects of Block Grants for the Needy: An Interpretation of the Evidence 2002The Temporary Assistance for Needy Families Program 2002The Impact of Welfare Benefits on Single Motherhood and Headship of Young Women: Evidence from the Census 2012Ending Access as We Know It: State Welfare Benefit Coverage in the TANF Era 1999Employer Demand for Welfare Recipients and the Business Cycle 1999Explaining Welfare Reform: Public Choice and the Labor Market

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