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4 The Effect of Welfare on Marriage and Fertility
Pages 50-97

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From page 50...
... For example, the findings show considerably stronger effects for white women than for black or nonwhite women, despite the greater participation rates of the latter group in the welfare system. Also, the findings often differ when demographic outcomes are correlated with welfare generosity in different waysvariation in welfare benefits across states in a particular year, for example, versus variation in welfare benefits over time.
From page 51...
... The second section outlines the different questions of interest and discusses those questions that have been addressed in the research literature. The third section discusses the methodological approach taken in the research literature toward the question and contrasts the method of experimentation with the nonexperimental method of using natural program variation.
From page 52...
... The Food Stamp program provides food coupons to low-income families regardless of family structure and hence does not have the same "bias" toward single-parent families as does AFDC. Eligibility and benefits for the program are based on the income and resources of a group of people who eat together, regardless of their relationship to each other.
From page 53...
... The difficulty with this way of viewing the problem is that it ignores what is called the "moral hazard" problem in insurance terminology the simple fact that individuals who are given insurance have an incentive to put themselves more at risk or even to cause the insured-against event to happen; this means, in the case of welfare and family structure, simply that individuals have an incentive to take actions that lead, directly or indirectly, to single motherhood as an outcome. lit is worth noting, however, that any program that provides benefits on the basis of the income of a family unit rather than the income of individuals will necessarily, and inherently, have at least a minimal amount of bias toward single-parent families.
From page 54...
... Whether welfare is more likely to influence some of these behaviors than others is an empirical matter, but it is often argued on intuitive grounds that some "routes" to single motherhood are more likely to be affected than others. For example, it is often argued that an unmarried woman's second and subsequent out-of-wedlock births may be more influenced by welfare benefits, especially if the woman is already on welfare, than the first birth because the latter is more likely to be "unintended" and because awareness of welfare is less acute before a woman has been on welfare.
From page 55...
... If welfare has undesirable effects, for example, it could be used as a tool to increase marriage rates and reduce nonmarital fertility rates in the future. In any case, as the review below shows, virtually the entire research literature on the effect of welfare on demographic outcomes has focused on the cross-sectional question, not the time-series question.
From page 56...
... 5There are exceptions, and more experimental evaluations examining demographic outcomes are under way at this writing. see Chapter 6 for a discussion of state-level experiments on demographic outcomes.
From page 57...
... If they do so, it is not unreasonable to assume that they will respond as well to changes in other characteristics of the program that have, either directly or indirectly, monetary implications. Types of Natural Variation Used in the Research Literature Aside from time-series variation, three types of natural variation in the welfare system have been utilized in most studies.
From page 58...
... A case can be made that such comparisons are superior to those using cross-state comparisons of levels, inasmuch as the levels of benefits and levels of marriage-fertility behavior may covary across states not only because of some true relationship but also for some other, spurious reason. For example, the low AFDC benefit levels and high marriage rates in most southern states may not be a reflection of a true welfare effect but may instead reflect the fact that the South is socially a relatively conservative region where social and cultural norms encourage marriage, as well as being a relatively conservative region politically where elected representatives do not legislate generous welfare benefits.7 In this latter interpretation, a positive correlation between benefit levels and marriage (for example)
From page 59...
... BASIC TIME-SERIES PATTERNS IN WELFARE AND DEMOGRAPHIC OUTCOMES Three of the methodologies cross-state comparison of levels, cross-state comparison of changes, and time-series analysis can be studied by examining trends over time in unadjusted state-level or national-level aggregates of demographic outcomes, on the one hand, and measures of welfare generosity, on the other. It is useful to present the basic patterns of these correlations with unadjusted aggregates before reviewing the multivariate analyses in the econometric literature.
From page 60...
... It has been noted repeatedly that the time-series evidence for a welfare effect on marriage and fertility is weak because welfare benefits declined in real terms over the 1970s and 1980s while marriage rates declined and nonmarital childbearing increased; both trends have been noted in the overviews in Chapters 2 and 3. Figure 4-1 provides further confirmation, because it indicates that real AFDC benefits have fallen continuously since the early 1970s.
From page 61...
... for 1993 were obtained for this study, and tabulations of welfare benefits and rates of single motherhood by state were computed. Single motherhood rates rather than illegitimacy are examined because single motherhood is a broader and more inclusive measure of the demographic outcome of interest.l Figure 4-3 shows the cross-state result for white women.ll Interestingly, very little relationship between headship and benefits appears in this figure, contrary to the results of 9The illegitimacy ratios are taken from vital statistics reports.
From page 62...
... Many of the largest states such as New York, California, and Illinois have relatively generous welfare systems as well as high rates of single motherhood; another large state, Texas, has low benefits and low single-motherhood rates. Clearly, a major question is whether this simple correlation is the result of some other characteristic of the populations of these states or of their socioeconomic environments; however, as seen in the next section, this positive covariation persists even when other measurable influences are controlled for and therefore appears to be reasonably robust.
From page 63...
... 1 1 0 100 200 300 400 500 600 700 800 900 Real Monthly AFDC Benefits for a Family of Four (in 1987 dollars) FIGURE 4-4 Single motherhood rates and real AFDC benefits by state: CPS, 1993, white women 20-44 without high school diploma.
From page 64...
... -350 -300 -250 -200 -150 -100 -50 0 50 100 150 Change in Real Monthly AFDC Benefits for a Family of Four (in 1987 dollars) FIGURE 4-5 Never-married female headship rates and real AFDC benefits by state: CPS, 1993, white women 20-44 without high school diploma.
From page 65...
... regions converged slightly over the 1970s and 1980s, with the southern states lowering benefits the least and northeastern states lowering their benefits the most, for example, but this pattern does not correspond at all to rates of change of single motherhood among less educated white women (e.g., the Northeast experienced the greatest increase in single motherhood even though it, along with the industrial midwestern states, lowered benefits the most)
From page 66...
... As shown in Figure 4-6, the levels of single motherhood for young, less educated black women are positively related to welfare benefits. Also, a comparison of changes in singlemotherhood rates and benefit levels also shows no relationship between the two, if not a negative relationship, as shown in Figure 4-7.
From page 67...
... FIGURE 4-7 Change in female headship rates and real AFDC benefits by state from 1977 to 1993: CPS, white women 20-44 without high school diploma. Relative to the graphical analysis, a simple question that can be answered here is whether the patterns of effects across states, over time and for different racial groups, is any different in a multivariate analysis where additional covariates are entered into the model and where more sophisticated methods of estimation are employed.
From page 68...
... As Table 4-1 shows, a majority of the estimates from cross-state comparisons of levels show that welfare benefits have an effect on marriage or fertility negative on the former, positive on the latter but when the results are disaggregated by race, the studies show more of an effect for white women than for nonwhite or black women. For white women, nine studies show effects of welfare while only two show no effect.
From page 69...
... For black women, however, these variables do appear to explain much of the raw difference; black women of similar characteristics in different states do not have significantly different demographic outcomes, at least in many of the studies in the literature, despite the differences in benefit levels across those states. It is not possible to determine the precise set of measured influences that account for the unadjusted difference across states noted earlier, but differences in urbanization may be one factor.l4 The weaker effect for black women is unexpected in light of their greater rates of participation in the welfare system compared to those of white women.
From page 70...
... There have been even fewer within-state and time-series studies, mainly for the reasons noted earlier: within-state comparisons must find some characteristic of women that affects their eligibility for benefits but does not independently affect their marriage and fertility outcomes, while time-series analyses inevitably have difficulty controlling for all alternative influences that are changing over time. For example, one study utilizing within-state variation did not examine benefits at all but found no effect of AFDC participation rates on demographic outcomes across races, a method that implicitly assumes there would be no racial difference in demographic outcomes in the absence of AFDC.
From page 71...
... with such endogenous variables, while others included in the regression variables of questionable exogeneity such as the labor force participation rates and earnings levels of men and women. Other defects in the studies arise as well: one constrained the welfare benefit coefficient to be the same as the coefficient on other income, while another defined the dependent variable as AFDC receipt, which could by itself and separately be expected to respond to benefit levels.
From page 72...
... Interestingly, the results imply that the changes studies yield stronger, rather than lesser, effects when the other variables are controlled; that estimated effects are larger in samples of older women (contrary to some of the hypotheses in the literature) and grow over time; and that the effects are stronger when vital statistics and NLSY data are used rather than CPS or PSID data.l7 The summary also indicates that welfare effects are weaker in studies that examine single motherhood as a single state, or remarriage or divorce, than studies that examine the effects on nonmarital fertility.
From page 73...
... Table 4-2 shows the different area-level controls used in the studies of changes. While some of the variables are potentially endogenous and therefore perhaps should be excluded, some of the studies 18This conclusion necessarily follows because a young woman who has a premarital birth necessarily becomes a single mother, thereby driving up the fraction of the population who are single mothers; but if the overall rate of single mothers is not significantly affected by welfare, it must be the case that these young mothers later marry so that, on average and over all ages, the singlemotherhood rate ends up not much different than it would have been if the early premarital childbearing had not occurred.
From page 74...
... Median wage of working women; median wage of working men; incarceration rate; unemployment rate; percent living in metropolitan area Percentage nonwhite; percent high school graduates; mean wage; fraction of population under 18; unemployment rate; fraction of population living in metropolitan area Average manufacturing wage; unemployment rate; per capita income; percent of population over 65; percent of population less than 18; percent black; Republican governor; Republican House; Republican Senate Unemployment rate; mean wage; mean manufacturing wage; mean wage in retail trade Sex ratio; male full-time median income; male education; male employment levels; female fulltime median income; female education; percent population 65+; percent black; percent Hispanic; percent rural; population; percent Catholic; percent Latter Day Saints; percent anti-abortion Protestant Unemployment rate; percent employed in manufacturing; percent employed in retail and wholesale trade; percent employed in services; percent employed in government None None control for no area-level variables at all, which could easily explain some of the differences in findings. A final important issue concerns the magnitudes of the estimated effects of welfare for those studies finding significant estimates.
From page 75...
... A neutral weighing of the evidence still leads to the conclusion that welfare has incentive effects on marriage and fertility, but the uncertainty introduced by the disparities in the research findings weakens the strength of that conclusion. The resolution of the discrepancies between these studies is important for welfare policy at minimum because the issue of how demographic outcomes are affected by the overall level of welfare benefits is so basic to all discussions of welfare effects.
From page 76...
... If, for example, the New Jersey family cap experiment shows little effect of a family cap on fertility, it would increase the confidence in that finding considerably if it could be concluded from the research literature that incremental benefits in the range tested in New Jersey also appear to have no effect on fertility. Even more important to continue to follow the New Jersey case the research literature should be capable of providing estimates of the effects of benefit changes of greater magnitudes than that in New Jersey and for a greater number of states with differing economic and social environments.
From page 77...
... Michael Foster, John Haaga, Robert Haveman, Anne Hill, Hilary Hoynes, Daniel Lichter, Howard Rolston, and Barbara Wolfe for comments; Julie Hudson and Chns Ruebeck for research assistance; and grant R01-HD27248 from the National Institute of Child Health and Human Development (NICHD) for support.
From page 78...
... Hudson, J., and R Moffitt 1997 Welfare, nonmarital childbearing, and single motherhood: Literature results and summaries.
From page 79...
... : 1-61. 1994 Welfare effects on female headship with area effects.
From page 80...
... Winegarden, C.R. 1988 AFDC and illegitimacy rates: A vector-autoregressive model.
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