Time Inconsistency and Welfare Program Participation: Evidence from the Nlsy

Fang, Hanming; Silverman, Dan

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Time Inconsistency and Welfare Program Participation: Evidence from the Nlsy

Cowles Foundation Discussion Paper No. 1465

50 Pages Posted: 26 Jul 2004

See all articles by Hanming Fang

Hanming Fang

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

Dan Silverman

University of Michigan at Ann Arbor - Economics Department; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: June 2004

Abstract

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 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 the utility loss stemming from the inability to commit to future decisions, and the potential utility gains from commitment mechanisms such as welfare time limits and work requirements.

Keywords: Time inconsistent preferences, Welfare reform, Labor supply

JEL Classification: J22, I38

Suggested Citation: Suggested Citation

Fang, Hanming and Silverman, Dan, Time Inconsistency and Welfare Program Participation: Evidence from the Nlsy (June 2004). Cowles Foundation Discussion Paper No. 1465, Available at SSRN: https://ssrn.com/abstract=568342