Quasi-Experimental Evidence on the Effects of Expanding Cash Welfare
75 Pages Posted: 18 Feb 2021 Last revised: 8 Apr 2021
Date Written: April 7, 2021
We study the labor supply and consumption responses to cash assistance delivered through the Temporary Assistance to Needy Families (TANF) Program in the United States. Exploiting a sharp increase in cash benefit generosity for low-income single-parent families in New Hampshire due to a legislative revision to payment calculations, we implement difference-in-differences and triple-differences to estimate the impacts of greater benefits on work behavior as well as on food expenditures and food security. Our results suggest that more generous cash assistance reduces labor supply among likely TANF-eligible individuals, but also increases household food spending and reduces the incidence of food insecurity. Our findings speak both to the moral hazard costs and to the standard-of-living improvements associated with expanded cash assistance in an era in which cash welfare is at historically low levels, is time limited, and imposes work requirements.
Keywords: welfare, cash assistance, Temporary Assistance to Needy Families, moral hazard, labor supply, redistribution, consumption, food security
JEL Classification: H53, H75, I38, J22
Suggested Citation: Suggested Citation