What Causes Public Assistance Caseloads to Grow?

Abstract

This paper uses state panel data to investigate changes in public assistance caseloads. Compared to other research, it uses more extensive data, both across states and over time; it utilizes a particularly rich set of control variables; it investigates the different subcomponents of the AFDC program separately; and it investigates the extent to which changes in caseloads are driven by changes in take-up rates versus in eligibility. The results indicate that an unexplained increase in AFDC-Basic caseloads started in the mid-1980s. This trend appears to be driven by three underlying components: a rise in child-only cases, an increase in take-up rates over the early 1990s during the economic slowdown, and a long-term increase in eligibility which is not well explained by a large set of control variables. In contrast, AFDC-UP caseload changes are relatively well-explained by the model in this paper and are far more responsive to economic factors. Recent state policy changes are correlated with caseload declines, but more than half of their affect appears to precede their implementation, suggesting that other changes in client and caseworker behavior was occurring in states that adopted major policy changes.