The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality

49 Pages Posted: 11 Mar 1997 Last revised: 16 May 2000

See all articles by Robert A. Moffitt

Robert A. Moffitt

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER)

David Ribar

George Washington University - Department of Economics; IZA Institute of Labor Economics

Mark Wilhelm

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics

Date Written: September 1996

Abstract

Welfare benefits in the U.S. have experienced a much-studied secular decline since the mid-1970s. We explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution: we posit that voters prefer benefits which are tied to low-skilled wages. We test the hypothesis using a 1969-1992 panel of state-level data. An additional contribution of" our analysis is the use of General Social Survey data on voter preferences for welfare which we combine with Current Population Survey data to determine the voter in each state who has the median preferred welfare benefit level. Our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits.

Suggested Citation

Moffitt, Robert and Ribar, David C. and Wilhelm, Mark, The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality (September 1996). NBER Working Paper No. w5774. Available at SSRN: https://ssrn.com/abstract=4723

Robert Moffitt (Contact Author)

Johns Hopkins University - Department of Economics ( email )

Baltimore, MD 21218-2685
United States
410-516-7611 (Phone)
410-516-7600 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David C. Ribar

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052 20052
United States
202-994-7608 (Phone)
202-994-6147 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Mark Wilhelm

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics ( email )

425 University Boulevard
Indianapolis, IN 46202-5140
Germany
317-274-4756 (Phone)
317-274-2347 (Fax)

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