Time-Inconsistency and Welfare Program Participation: Evidence from the NLSY
35 Pages Posted: 28 Oct 2009
We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the National Longitudinal Surveys (NLSY) 1979, we provide estimates of the degree of time-inconsistency, and of its influence on the welfare take-up decision. With these estimates, we conduct counterfactual experiments to quantify a measure of the utility loss stemming from the inability to commit to future decisions, and the potential gains from commitment mechanisms such as welfare time limits and work requirements.
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