Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States

Powers, Elizabeth

doi:10.1016/s0047-2727(97)00087-x

Cited by 100 publications

(84 citation statements)

References 8 publications

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“…Recent theoretical work by Hubbard et al (1995) suggested that a significant saving deterrent is associated with means and asset-tested social insurance programmes. Powers (1998) and Gruber and Yelowitz (1999) confirmed this theoretical prediction by showing a strong positive correlation between social insurance eligibility and consumption expenditure. Starr-McCluer (1996) examined the relationship between insurance coverage and wealth, and found a positive effect from health insurance coverage on wealth holdings.…”

Section: Introductionsupporting

confidence: 65%

Health insurance and savings over the life cycle—a semiparametric smooth coefficient estimation

Liu¹,

Huang²

2004

J of Applied Econometrics

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SUMMARYIndividuals save for future uncertain health care expenses. This is less efficient than pooling health risk through insurance. The provision of comprehensive health insurance may raise welfare by providing the missing market to smooth out consumption through the life cycle. We employ a semiparametric smooth coefficient model to examine the effects of the introduction of the National Health Insurance in Taiwan in 1995 on savings and consumption over the life cycle. The idea is to estimate the coefficients of health insurance which vary with age. Our results suggest that younger households are more sensitive to the risk reductions, and that they demonstrate a greater response in the reduction of their precautionary saving.

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Section: Introductionsupporting

confidence: 65%

Health insurance and savings over the life cycle—a semiparametric smooth coefficient estimation

Liu¹,

Huang²

2004

J of Applied Econometrics

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“…As explained in the previous subsection, excluding vehicle assets is particularly problematic for an analysis of the saving behavior of poor households. Also, due to other limitations in the data, the findings in Powers (1998) are not likely to be representative of the population of all single mothers. The NLS-YW originated in 1968 with a sample of women aged 14 to 24.…”

Section: Previous Empirical Workmentioning

confidence: 90%

“…Two empirical studies examine the effect of asset restrictions under the AFDC/TANF program on the saving behavior of the poor: Powers (1998) and Hurst and Ziliak (Forthcoming). Due to data limitations, Powers does not include vehicle equity in her measure of household assets.…”

Section: Previous Empirical Workmentioning

confidence: 99%

“…The NLS-YW originated in 1968 with a sample of women aged 14 to 24. Thus, the sample of single mothers in Powers (1998) is limited to women between the ages of 24 and 34 at the base year of her study and these women are at least 29 years old in the post-OBRA 81 wave. This excludes a substantial portion of single mothers who are exposed to these transfer 5 Other studies have analyzed the effects of asset restrictions for different programs.…”

Section: Previous Empirical Workmentioning

confidence: 99%

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Welfare Reform, Saving, and Vehicle Ownership: Do Asset Limits and Vehicle Exemptions Matter?

Sullivan

2005

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This paper examines whether AFDC/TANF asset tests affect the asset holdings of low-educated single mothers, exploiting variation in asset limits and exemptions across states and over time. There are important reasons to examine vehicle assets in this context. For example, vehicles make up a very significant share of total wealth for poor families, and the variation in vehicle exemptions over time and across states far exceeds the variation in asset limits. Consistent with other recent research, I find little evidence that asset limits have an effect on the amount of liquid assets that single mothers hold. However, I find evidence that vehicle exemptions do have an important effect on vehicle assets. The findings suggest that moving from a $1500 vehicle exemption to a full vehicle exemption increases the probability of owning a car by 20 percentage points for low-educated single mothers relative to a comparison group. Also, the results indicate that single mothers are not substituting vehicle equity for liquid assets in response to more relaxed restrictions on vehicles. † I thank

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“…The only paper of which we are aware that explicitly estimates the effects of asset tests is Powers (1998). She examines the effect of variations in asset testing for the AFDC program in the 1970s on the savings of single female headed households.…”

Section: Related Empirical Workmentioning

confidence: 99%

Public Health Insurance and Private Savings

Gruber

Yelowitz

1999

Journal of Political Economy

203

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2We assess the effect of a means and asset-tested social insurance program, Medicaid, on the savings behavior of households. We do so using both data on asset holdings and on consumption, matched to information on the eligibility of families for health insurance coverage under this program.Exogenous variation in Medicaid eligibility is provided by the dramatic expansion of this program over the 1984 to 1993 period. We document that Medicaid eligibility has a sizeable and significant negative effect on wealth holdings, and we confirm this finding by showing a strong positive association between Medicaid eligibility and consumption expenditures. We also exploit the fact that asset testing was phased out by the Medicaid program over this period to document that these Medicaid effects are much stronger in the presence of an asset test.

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Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States

Cited by 100 publications

References 8 publications

Health insurance and savings over the life cycle—a semiparametric smooth coefficient estimation

Health insurance and savings over the life cycle—a semiparametric smooth coefficient estimation

Welfare Reform, Saving, and Vehicle Ownership: Do Asset Limits and Vehicle Exemptions Matter?

Public Health Insurance and Private Savings

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