This paper reviews the economics literature on welfare reform over the 1990s. A brief summary of the policy changes over this period is followed by a discussion of the methodological techniques utilized to analyze the effects of these changes on outcomes.
This paper evaluates the effectiveness of recent welfare reforms, investigating the effects of both state-specific waivers in the early 1990s and the 1996 federal reform legislation. Unlike earlier work, we analyze a wide array of indicators, including welfare participation, labor market involvement, earnings, income and poverty, and family formation. While no single methodology is entirely satisfying, the results in this paper are convincing in part because they are consistent across alternative approaches. We find strong evidence that these policy changes reduced public assistance participation and increased family earnings. The result was a rise in total family income and a decline in poverty. The gains from the 1996 reforms were not as broadly distributed across the distribution of less-skilled women as were the effects of waivers. Waivers also increased labor market involvement among the less-skilled, but the 1996 reforms had little additional impact on work behavior after controlling for economic forces. These policies also appeared to have an impact on family structure.
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 focussed 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 investigates 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 take-up 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 -with benefits paid to 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. Take-up rates also increased during this time period, but not by a large amount.
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