The Effects of Welfare and Taxes

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This research involves two projects and several extensions.. The first examines the effects of recent welfare and tax changes on the labor supply and program participation of single mothers. A wide range of programs: federal and state Earned Income Tax Credits (EITCs), AFDC, Food Stamps, Medicaid, Child Care, and AFOC training programs is analyzed. Also analyzed is the period, 1984 1996, and at least two large micro data sets. In the past ten years there have been large, often unprecedented changes in these programs. There have also been unprecedented changes in the employment of single mothers, the primary group affected by these policies, that seem to be in large part due to these policy changes. The current work focuses mostly on policy effects on employment and to a lesser extent hours worked. In addition, focus is directed on hours worked, the effects of the program changes on program participation, and other outcomes. This first project encompasses in scope and time period much of the previous literature. Many of the large policy changes that are examined have not been previously studied and they offer an opportunity to evaluate a wide range of incentive effects. The second large project analyzes the migration of welfare prone populations. There are very large differences across states in the generosity of welfare programs. The possibility of migration has an important influence on state policies and affects the well being of recipients. The extent of migration is important in assessing the biases in much research on welfare programs that uses cross state program differences to identify policy effects. This area of research has produced strongly conflicting results. Even in the absence of the conflicting results, much of the past research has important methodological flaws which call their results into question. Some of these methodological problems have been previously recognized, while others have not The extent of welfare induced migration is examined using several large micro data sets and alternative approaches. Both of these projects have important methodological components. Both comparison group based methods.(sometimes called quasi experimental methods or natural experiments) and structural approaches are used. The work will elucidate the identifying assumptions and advantages and disadvantages of both structural and comparison group-based methods. In some cases, it is possible to integrate the best aspects of both approaches by estimating a structural model with transparent and plausibly exogenous sources of identifying variation. The research also will probe some of the reasons for the conflicting results of previous work.