Welfare Reform and the Intergenerational Transmission of Dependence

Abstract

AUGUST 2017 IZA DP No. 10942 Welfare Reform and the Intergenerational Transmission of Dependence *We estimate the effect of welfare reform on the intergenerational transmission of welfare participation and related economic outcomes using a long panel of mother-daughter pairs over the survey period 1968-2013 in the Panel Study of Income Dynamics. Because states implemented welfare reform at different times starting in 1992, the cross-state variation over time permits us to quasi-experimentally separate out the effect of mothers' welfare participation during childhood on daughters' economic outcomes in adulthood in the preand post-welfare reform periods. We find that a mother's welfare participation increased her daughter's odds of participation as an adult by roughly 30 percentage points, but that welfare reform attenuated this transmission by at least 50 percent, or at least 30 percent over the baseline odds of participation. While we find comparable-sized transmission patterns in daughters' adult use of the broader safety net and other outcomes such as educational attainment and income, there is no diminution of transmission after welfare reform. These results are obtained by addressing nonrandom selection into welfare and are robust to other potential threats to identification from misclassification error, life-cycle age effects, and cross-state mobility.

Literature review on the impact of welfare policy design on children and youth

“…For example, the same US study by Hartley et al. (2017) that found strong within program effects, did not find any effects on welfare use in general for adult daughters of affected mothers. The reforms also did not appear to reduce other undesirable economic outcomes such as unemployment, poverty, and low human capital attainment.…”

“…Studies that examine the impact of childhood exposure to welfare on other later life outcomes, such as across (as opposed to within) program participation, schooling, employment and health, tend to arrive at different conclusions. For example, the same US study by Hartley et al (2017) that found strong within program effects, did not find any effects on welfare use in general for adult daughters of affected mothers. The reforms also did not appear to reduce other undesirable economic outcomes such as unemployment, poverty, and low human capital attainment.…”

“…(2016); Hartley et al. (2017); Avram et al. (2018); Hoynes and Patel (2018); Bastian (2020); East (2020); Low et al.…”

“…Hartley et al. (2017) showed that mothers’ welfare participation in AFDC/TANF 3 significantly increased daughters’ participation in the same program by 30 percentage points, and the various welfare reforms significantly attenuated this transmission by 50%. These authors arrived at this conclusion by exploiting the quasi‐experimental nature of the cross‐state variation in these reforms over time with a difference‐in‐difference model.…”

“…Specifically, reforms to the US welfare system during the 1990′s, including the 1996 PRWORA 2 reforms, predominantly affected single mothers and tended to restrict program access overall by implementing policies such as payment caps, time limits, sanctions, and work requirements. Hartley et al (2017) showed that mothers' welfare participation in AFDC/TANF 3 significantly increased daughters' participation in the same program by 30 percentage points, and the various welfare reforms significantly attenuated this transmission by 50%. These authors arrived at this conclusion by exploiting the quasi-experimental nature of the cross-state variation in these reforms over time with a difference-in-difference model.…”