The Effect of Incremental Benefit Levels on Births to Afdc Recipients

Abstract

We evaluate the potential for family cap policies to reduce the number of out-of-wedlock births to AFDC recipients. These policies, already enacted in a few states, eliminate the incremental benefits entitled to AFDC recipients who have additional children. In our analysis, we use the special 1990 Panel of the Survey of Income and Program Participation (SIPP). Estimating logit regressions, we find that incremental benefits have a positive effect on the probability of a birth among AFDC recipients (although statistically insignificant). However, using a quasi-experimental design, we find a positive correlation between incremental benefits and fertility for each of our comparison groups which is larger than the positive correlation for AFDC recipients. This result indicates that a large part of our previously estimated positive effect on the fertility of AFDC recipients is spurious. Finally, we find similar results among whites, blacks and never-married women, but less consistent results among Hispanics and divorced or separated women. Overall, our results do not provide evidence of a large positive effect of incremental benefits on the fertility of AFDC recipients.

JEL Classification: I38, J13