Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise

46 Pages Posted: 24 May 2001

See all articles by Michael P. Keane

Michael P. Keane

Arizona State University (ASU) - Economics Department; University of Technology, Sydney (Visiting July 2006-Present)

Kenneth I. Wolpin

University of Pennsylvania - Department of Economics

Date Written: December 2000

Abstract

There is an extensive literature in economics that seeks to determine the quantitative impact of welfare benefits on female labor supply and the propensity of women to participate in the welfare system. A growing literature also examines the impact of welfare generosity on fertility and marriage - behaviors that influence welfare eligibility and the level of benefits. Most of the studies adopt a static choice framework, albeit not always explicitly, to motivate their empirical specifications. However, the behaviors that are presumably affected by the welfare system (fertility, marriage, work, school) clearly have both immediate and long-term consequences. If potential welfare recipients are forward-looking, they will consider these long term consequences when making current decisions. In this paper, we investigate the implications of the existence of forward-looking behavior for empirical work that seeks to determine the effect of welfare benefits on behavior.

Suggested Citation

Keane, Michael P. and Wolpin, Kenneth I., Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise (December 2000). PIER Working Paper No. 01-019. Available at SSRN: https://ssrn.com/abstract=269963 or http://dx.doi.org/10.2139/ssrn.269963

Michael P. Keane

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

University of Technology, Sydney (Visiting July 2006-Present)

PO Box 123 Broadway
NSW 2007
Australia
480-965-1053 (Phone)
480-965-0748 (Fax)

Kenneth I. Wolpin (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7708 (Phone)
215-573-2057 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
91
Abstract Views
1,052
rank
278,114
PlumX Metrics