Working Paper: NBER ID: w16504
Authors: Marianne Bitler; Hilary W. Hoynes
Abstract: The passage of the 1996 welfare reform bill led to sweeping changes to the central U.S. cash safety net program for families with children. Importantly, along with other changes, the reform imposed lifetime time limits for receipt of welfare de facto ending the entitlement nature of cash welfare for poor families with children in the United States. Despite dire predictions about poverty and deprivation, the previous research shows that caseloads declined and employment increased, with no detectible increase in poverty or worsening of child-well-being. We re-evaluate these results in light of the severe recession which began in December 2007. In particular, we examine how the cyclicality of the response of program caseloads and family well-being has been altered by the implementation of welfare reform. We find that use of food stamps and non-cash safety net program participation have become significantly more responsive across economic cycles after welfare reform, going up more after reform when unemployment increases. By contrast, there is no evidence that cash welfare for families with children is more responsive after reform, and some evidence that it might be less so. There is some evidence that poverty increases more with the unemployment rate after reform (and no evidence that poverty increases less with unemployment after reform). We find that reform has led to no significant effects on the cyclical responsiveness of food consumption, food insecurity, health insurance, household crowding, or health.
Keywords: Welfare Reform; Safety Net; Poverty; Food Assistance; Economic Cycles
JEL Codes: I3; I38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Welfare reform (I38) | Family well-being (I31) |
| Welfare reform + Unemployment rate (I38) | Food stamp caseloads (H53) |
| Welfare reform + Unemployment rate (I38) | Cash welfare caseloads (I38) |
| Unemployment rate (J64) | Poverty rates (I32) |
| Welfare reform (I38) | Responsiveness of food stamps to economic cycles (H53) |
| Welfare reform (I38) | Responsiveness of cash welfare to economic cycles (I38) |