Working Paper: NBER ID: w24356
Authors: Hamish Low; Costas Meghir; Luigi Pistaferri; Alessandra Voena
Abstract: The 1996 US welfare reform introduced time limits on welfare receipt. We use quasi-experimental evidence and a lifecycle model of marriage, divorce, program participation, labor supply and savings to understand the impact of time limits on behavior and well-being. Time limits cause women to defer claiming in anticipation of future needs, an effect that depends on the probabilities of marriage and divorce. Time limits cost women 0.5% of life-time consumption, net of revenue savings redistributed by reduced taxation, with some groups affected much more. Expectations over future marital status are important determinants of the value of the social safety net.
Keywords: welfare reform; labor supply; marriage; divorce; social safety net
JEL Codes: H2; H31; H53; J08; J12; J18; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of time limits on welfare benefits (I38) | tradeoff between immediate benefit utilization and future insurance needs (G52) |
| introduction of time limits on welfare benefits (I38) | decrease in welfare utilization among single and married women (I38) |
| decrease in welfare utilization among single and married women (I38) | increase in employment among single mothers (J12) |
| introduction of time limits on welfare benefits (I38) | decrease in prevalence of divorce among affected women (J12) |
| time limits create a banking behavior where mothers prefer to preserve their eligibility for future needs (D15) | utility loss among low-educated women (J79) |
| time limits create a banking behavior where mothers prefer to preserve their eligibility for future needs (D15) | losses faced by single mothers under specific conditions (J12) |