Behavioral Responses and Welfare Reform: Evidence from a Randomized Experiment

38 Pages Posted: 31 Aug 2017

See all articles by Robert Hartley

Robert Hartley

Columbia University

Carlos Lamarche

University of Kentucky

Abstract

Recent studies have used a distributional analysis of welfare reform experiments suggesting that some individuals reduce hours in order to opt into welfare, an example of behavioral-induced participation. Using data on Connecticut's Jobs First experiment, we find no evidence of behavioral-induced participation at the highest conditional quantiles of earnings. We offer a simple explanation for this: women assigned to Jobs First incur welfare participation costs to labor supply at higher earnings where the control group is welfare ineligible. Moreover, as expected, behavioral components and costs of program participation do not seem to play a differential role at other conditional quantiles where both groups are eligible to participate. Our findings show that a welfare program imposes an estimated cost up to 10 percent of quarterly earnings, and these costs can be heterogeneous throughout the conditional earnings distribution. The evidence is obtained by employing a semi-parametric panel quantile estimator for a model that allows women to vary arbitrarily in preferences and costs of participating in welfare programs.

Keywords: welfare reform, quantile regression, panel data, program participation

JEL Classification: J22, I38, C21, C33

Suggested Citation

Hartley, Robert and Lamarche, Carlos, Behavioral Responses and Welfare Reform: Evidence from a Randomized Experiment. IZA Discussion Paper No. 10905, Available at SSRN: https://ssrn.com/abstract=3029775 or http://dx.doi.org/10.2139/ssrn.3029775

Robert Hartley (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Carlos Lamarche

University of Kentucky ( email )

Lexington, KY 40506
United States

HOME PAGE: http://gattonweb.uky.edu/Faculty/lamarche/

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