Working Paper: NBER ID: w10121
Authors: Marianne P. Bitler; Jonah B. Gelbach; Hilary W. Hoynes
Abstract: Labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings, transfers, and income. Yet most welfare reform research focuses on mean impacts. We investigate the importance of heterogeneity using random-assignment data from Connecticut's Jobs First waiver features key elements of post-1996 welfare programs. Estimated quantile treatment effects exhibit the substantial heterogeneity predicted by labor supply theory. Thus mean impacts miss a great deal. Looking separately at dropouts and other women does not improve the performance of mean impacts. Evaluating Jobs First relative to AFDC using a class of social welfare functions, we find that Jobs First's performance depends on the degree of inequality aversion, the relative valuation of earnings and transfers, and whether one accounts for Jobs First's greater costs. We conclude that welfare reform's effects are likely both more varied and more extensive than has been recognized.
Keywords: Welfare Reform; Labor Supply; Quantile Treatment Effects
JEL Codes: I3; C1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Jobs First program (J68) | varied outcomes across income distribution (F61) |
| Jobs First program (J68) | positive effects for some women at lower end of earnings distribution (J79) |
| Jobs First program (J68) | negative effects for women at upper quantiles (J16) |
| time limit imposed by Jobs First program (C41) | increased labor supply and earnings (J20) |
| mean impacts of welfare reform (I38) | miss significant heterogeneity in treatment effects (C21) |