Participation in the AFDC Program and the Stigma of Welfare Receipt: Estimation of a Choice-Theoretic Model

Abstract

One of the important issues in policy discussions of the present system and of welfare-reform alternatives concerns the degree to which low-income families eligible for will in fact participate. In the major program in the current system, Aid to Families with Dependent Children (AFDC), participation rates have risen over time, particularly in the late 1960's, but have never been 100 percent. Explaining such changes in participation rates is an important subject of investigation because (a) participation rates lead directly to caseload sizes and thus to the possibility of a welfare explosion, and (b) the estimates of the effect of welfare-program tax rates and guarantees [10] are strictly applicable only to participants and not to non-participants. The most likely explanation for this seemingly irrational phenomenon of families rejecting an increase in disposable income lies in the of receipt, for many families consider participation to be demeaning, socially undesirable, and/or destructive of self-respect and feelings of self-worth. However, although there has been considerable discussion of the nature of stigma [13], particularly in the sociological literature [11], there is a need to establish a firm theoretical base for the phenomenon and to formally investigate its properties.' In this paper a model of participation is developed which incorporates stigma and thus establishes such a theoretical base, and estimates of the parameters of the model are obtained. There are two key characteristics of the model. First, participation in a program is introduced into the utility function under the assumption that stigma represents a distaste for welfare. The desire to participate is thus formulated within a traditional consumer