Welfare Generosity Research Articles

Putting Poverty in Political Context: A Multi-Level Analysis of Adult Poverty across 18 Affluent Democracies

Our study analyzes how political context, embodied by the welfare state and Leftist political actors, shapes individual poverty. Using the Luxembourg Income Study, we conduct a multi-level analysis of working-aged adult poverty across 18 affluent Western democracies. Our index of welfare generosity has a negative effect on poverty net of individual characteristics and structural context. For each standard deviation increase in welfare generosity, the odds of poverty decline by a factor of 2.3. The odds of poverty in the United States (the least generous welfare state) are greater by a factor of 16.6 than a person with identical characteristics in Denmark (the most generous welfare state). Significant interaction effects suggest that welfare generosity reduces the extent to which low education and the number of children increase poverty. Also, welfare generosity reduces poverty among those with low education, single-mother households and young households. We show that Leftist parties and union density reduce the odds of poverty, however their effects channel through the welfare state. Ultimately, poverty is shaped both by individual characteristics and the political context in which the individual resides.

The Least Generous Welfare State? A Case of Blind Empiricism

Comparative analyses of modern welfare states rely heavily on measures of social expenditure, which have been developed and refined by the Organization for Economic Cooperation and Development. These measures are used to assess the relative degrees of welfare effort, generosity and social protection afforded by welfare states. A critical analysis of the most rigorous and widely used measures of social expenditure reveals three fundamental issues, which involve the assumption of proportionality, indifference to need, and the discounted activity of deficit spending. These issues undermine the conventional social accounting for welfare states, making it virtually incomprehensible to interpret as a comparative measure of welfare effort, generosity, and social protection.

The Politics of Women's Economic Independence

We identify the political conditions that shape the economic position of married/cohabiting women and of the economically most vulnerable group of women—single mothers. Specifically, we examine the determinants of reductions in single mothers' poverty rate due to taxes and transfers, and women's wages relative to spouses'/ partners' wages. The Luxembourg Income Study archive yields an unbalanced panel with 71 observations on 15 countries. The principal determinants of poverty reduction due to taxes and transfers are left government, constitutional veto points, and welfare generosity. The relative wage of women in couples is a function mainly of female labor force participation, part time work among women, and women's mobilization. In explaining the causal pathways to these outcomes, we highlight the interrelationships of welfare state, care, and labor market policies.

Premarital Birth Among Young Hispanic Women: Evidence from Semiparametric Competing Risks Analysis

The existing literature on welfare effects on marriage and fertility has largely focused on groups of white and black women. By contrast, Hispanic women have received little attention. This paper examines the effects of welfare generosity on a sample of young Hispanic women’s premarital fertility and marriage choices. A bivariate competing risks duration model framework allows us to identify the process of young women’s premarital fertility and the process of marriage, effectively controlling for observed characteristics and unobservables. Our findings indicate a 10% increase in welfare generosity results in a 10% increase in premarital births and a 7% decrease in marriages by age 24; both effects are significant.

Economic Assistance and Crime

Many countries struggle with the question of appropriate social welfare spending. Here we test several hypotheses about the dynamics between social welfare spending and crime. We do so using pooled, cross-national time-series data. Our findings suggest that per capita social welfare spending is associated with lower rates of both theft and homicide. Time lagged analysis suggests that the current level of social welfare spending, not that of recent years, accounts for any possible suppression of crime. The data also suggest that, whereas high homicide rates do not appear to inspire increased social welfare generosity, lagged measures of theft rates are associated with subsequent increases in social welfare spending among high theft countries.

Estimating the impact of gubernatorial partisanship on policy settings and economic outcomes: A regression discontinuity approach

Using panel data from US states over the period 1941–2002, I measure the impact of gubernatorial partisanship on a wide range of different policy settings and economic outcomes. Across 32 measures, there are surprisingly few differences in policy settings, social outcomes and economic outcomes under Democrat and Republican Governors. In terms of policies, Democratic Governors tend to prefer slightly higher minimum wages. Under Republican Governors, incarceration rates are higher, while welfare caseloads are higher under Democratic Governors. In terms of social and economic outcomes, Democratic Governors tend to preside over higher median post-tax income, lower post-tax inequality, and lower unemployment rates. However, for 26 of the 32 dependent variables, gubernatorial partisanship does not have a statistically significant impact on policy outcomes and social welfare. I find no evidence of gubernatorial partisan differences in tax rates, welfare generosity, the number of government employees or their salaries, state revenue, incarceration rates, execution rates, pre-tax incomes and inequality, crime rates, suicide rates, and test scores. These results are robust to the use of regression discontinuity estimation, to take account of the possibility of reverse causality. Overall, it seems that Governors behave in a fairly non-ideological manner.

What's the Difference Between a Donkey and an Elephant? Using Panel Data from US States to Estimate the Impact of Partisanship on Policy Settings and Economic Outcomes

Using panel data from US states over the period 1963-2002, I measure the impact of partisanship on a wide range of different policy settings and economic outcomes. Across 32 measures, there are surprisingly few differences in policy settings, social outcomes and economic outcomes under Democrats and Republicans. In terms of policies, Democratic Governors tend to prefer slightly higher minimum wages and more redistributive taxes. Under Republican Governors, incarceration rates are higher, while welfare caseloads are higher under Democratic Governors. In terms of social and economic outcomes, Democratic Governors tend to preside over higher median post-tax income, lower post-tax inequality, and lower unemployment rates. However, for 25 of the 32 dependent variables, gubernatorial partisanship does not have a statistically significant impact on policy outcomes and social welfare. I find no evidence of gubernatorial partisan differences in welfare generosity, the number of government employees or their salaries, state revenue, incarceration rates, execution rates, pre-tax incomes and inequality, crime rates, suicide rates, and test scores. These results are robust to the use of regression discontinuity estimation, to take account of the possibility of reverse causality. Overall, it seems that Governors behave in a fairly non-ideological manner.

The Impact of State Welfare Policies on Women's Cohabitation

Marriage and its relation to choices of fertility, work, and welfare receipt have been widely studied, yet little research has focused on nonmarital cohabitation. This paper presents a multinomial logit model of an American woman's major cohabitation options: not cohabiting, cohabiting with a spouse and possibly others, or cohabiting with others but not with a spouse. Because cohabitation has the possibility of alleviating poor women's need for public assistance, I investigate the connection between state welfare policies and the cohabitation choice. The analysis moves beyond the typical measure of welfare generosity--the monthly benefit level--to include two sets of state welfare regulations that affect how cohabitors' contributions to household expenditures may affect the woman's welfare benefit. The use of Census data allows sufficient sample sizes for separate estimation for White and Black women. I find that many personal and state variables substantially alter the choice of cohabitation, but welfare programs generally do not. The strongest impact of welfare programs falls on the choice of marriage, where I find support for the theory that more generous AFDC payments should be associated with fewer marriages. Although the patterns vary by race, the results reveal that other welfare policies do not exert a strong influence on women's choice of cohabitation and marriage.

Why Immigrants Manage to Grab More Social Benefits: Empirical Cross-Country Analysis

Using data from the Luxembourg Income Study we analyze state welfare generosity to immigrants and natives in Sweden, Norway, Belgium, Germany and the USA. The distinction between EU and non-EU immigrants proves to be an interesting one. We find a substantial social income gap between non-EU immigrants and natives, while EU immigrants are quite similar to natives. The main reasons for the existence of this social income gap are family wage income, number of children and income earners in the family. While these characteristics explain almost fully the gap in the EU countries, they are of little help in others.

Why Immigrants Manage to Grab More Social Benefits? Empirical Cross-Country Analysis

Using data from the Luxembourg Income Study we analyze state welfare generosity to immigrants and natives in Sweden, Norway, Belgium, Germany and the USA. The distinction between EU and non-EU immigrants proves to be an interesting one. We find a substantial social income gap between non-EU immigrants and natives, while EU immigrants are quite similar to natives. The main reasons for the existence of this social income gap are family wage income, number of children and income earners in the family. While these characteristics explain almost fully the gap in the EU countries, they are of little help in others.

Local Government and Welfare Generosity: Municipality Spending on Social Welfare

Although it is difficult for local governments to give support for social welfare recipients top political priority, there are huge variations in the support recipients actually receive among Norwegian municipalities. However, local governments representing different party ideologies may prefer to support different dimensions of generosity. Some municipalities could have a liberal attitude to eligibility rules but be strict on time limits and the amount of money provided. Others may be generous regarding time limits or amounts received once one is accepted as a welfare client. Data from the mid 1990s indicate the variation in support is related to different generosity dimensions for different party groups. While the total number of clients seems unrelated to politics and basically correlates with local social problems, the duration and amount of support are related to the political composition of the municipality assembly. Devoid of any large variation, both time limits and the amount of support increase in accordance with socialist leanings, and the total budget used for social welfare support also increases with the proportion of women in the municipality assembly.

Migration, the Life Cycle, and State Benefits: How Low Is the Bottom?

I show that among women likely to use welfare, movers move to higher‐benefit states. I also find that the probability likely welfare users will move at all is lower in higher‐benefit states. This effect is concentrated early in the life cycle, as theory predicts. I construct a theoretical framework to measure the impact of welfare migration on optimal state benefits. Simulation results suggest little impact in higher‐benefit states, but possibly a more substantial impact in other states. Finally, evidence suggests little reason for concern (due to welfare migration) in using cross‐state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables.

Pensioners in Poverty: The Impact of Benefits-in-Kind on Pensioner Incomes and Poverty Measures in Australia, Ireland and the UK

Cross-national studies of pensioner income and poverty have widened the definition of income to take account of factors such as taxation, home ownership and government services to produce comparative rankings of welfare generosity reflecting the reality of pensioners' experience. One area absent from current research is an exploration of the impact of benefits-in-kind on income and poverty measures. This article starts to address that gap. It explores the availability of benefits-in-kind across a sample of Western countries and examines in detail the impact of such benefits on measures of income, poverty and cross-national comparisons for two hypothetical pensioner households in the three countries (Australia, Ireland and the UK) which appear to make most use of such benefits. It suggests that including benefits-in-kind in measures of income will raise a proportion of pensioners in these countries above national poverty lines and in Ireland and Australia will assist in meeting adequacy standards. The impact on cross-national rankings is marginal although this calculation is fraught with difficulties. The article concludes by suggesting that further in-depth research on a larger number of countries involving a wider variety of households would be beneficial for cross-national comparisons and national policy-making.

A Wider Race? Interstate Competition across Health and Welfare Programs

Does interstate competition reduce welfare generosity? Most analyses of this question focus on Aid to Families with Dependent Children (AFDC) benefit levels. The welfare-reducing logic of interstate competition should apply to all redistributive programs, however. We test for competitive effects more generally, examining several measures of welfare generosity for AFDC, Medicaid, and Supplemental Security Income-State (SSI-S) policy. We find evidence of interstate competition across multiple programs and measures over which states have authority. We also find variation in the effects that is consistent with variation in political debates across the programs.

Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise

There is an extensive literature in economics that seeks to determine the quantitative impact of welfare benefits on female labor supply and the propensity of women to participate in the welfare system. A growing literature also examines the impact of welfare generosity on fertility and marriage - behaviors that influence welfare eligibility and the level of benefits. Most of the studies adopt a static choice framework, albeit not always explicitly, to motivate their empirical specifications. However, the behaviors that are presumably affected by the welfare system (fertility, marriage, work, school) clearly have both immediate and long-term consequences. If potential welfare recipients are forward-looking, they will consider these long term consequences when making current decisions. In this paper, we investigate the implications of the existence of forward-looking behavior for empirical work that seeks to determine the effect of welfare benefits on behavior.

Welfare generosity and location choices among new United States immigrants

This paper extends the limited research that investigates the determinants of location choices among new United States immigrants. Unlike previous work, this study employs data that includes country of birth, major categories of admission, and state of intended residence for each new immigrant. Additionally, due to censoring concerns in immigration data this study uses a Tobit estimation technique. The results suggest significant correlation between immigrant inflow and welfare generosity. Furthermore, the welfare motivation seems to be equally pervasive in every major category of admission among new immigrants.

Welfare generosity, pregnancies and abortions among unmarried AFDC recipients

Even before the 1996 overhaul of the U.S. welfare system, a number of states had ended the practice of paying extra benefits to families who have additional children while receiving welfare. Proponents believe that this reform can reduce births to recipients, however many worry that it may encourage women to obtain abortions. Using a sample of unmarried AFDC recipients from the NLSY, we estimate a bivariate probit model of pregnancy and, conditional on becoming pregnant, the probability of abortion. Our results lend some support for the proposition that reducing incremental AFDC benefits will decrease pregnancies without increasing abortions.

Cross-state variation in Medicaid programs and female labor supply

Although the Medicaid program is partially controlled by the federal government, there is considerable latitude in the ability of states to set eligibility requirements and the types of services available to recipients. This research examines the impact of different state Medicaid programs on the decision to enter the labor force and the number of hours worked by female heads of households. A pooled cross-section data set constructed from the 1988 through 1993 Current Population Survey March Supplements is used to test if different benefit levels across states impact labor supply behavior. This study adds to the existing Medicaid literature by incorporating new benefit measures and explicitly controlling for state random and fixed effects. OLS results support the prediction that Medicaid expenditures reduce labor supply, but controlling for state fixed or random effects alters the effect of both the AFDC and Medicaid programs on both the decision to participate as well as the number of hours worked of female heads of households. We also consider the effects of policy endogeneity on these estimates using instruments for state welfare generosity and find evidence that estimates of the effect of welfare on labor supply are sensitive to the failure to control for time-varying policy endogeneity.

An empirical analysis of the welfare magnet debate using the NLSY

This paper examines the extent to which differences in welfare generosity across states leads to interstate migration. Using microdata from the National Longitudinal Survey of Youth (NLSY) between 1979 and 1992, we employ a quasi-experimental design that utilizes the categorical eligibility of the welfare system. The pattern of cross-state moves among poor single women with children, who are likely to be eligible for benefits is compared to the pattern among other poor households. We find little evidence indicating that welfare-induced migration is a widespread phenomenon.

The Demand for Welfare Generosity

This paper estimates economic models of the determinants of state benefit levels in the Aid to Families with Dependent Children (AFDC) program using 1969-1992 data. These models have been extensively researched; however, the existing literature has produced an unacceptably wide range of estimates. Using alternative econometric procedures, this paper systematically examines both the specification assumptions underlying previous analyses as well as several additional specification issues. It is, therefore, able to replicate and reconcile estimates from previous studies and to provide updated, consensus estimates of the demand for welfare generosity. It finds that changes in the average level of income within states have small but statistically significant positive effects on benefits with the confidence bounds on the elasticity extending from 0.11 to 0.82. Changes in the effective price of redistribution are found to have, at most, weak negative effects with elasticities in the range of -0.14 to 0.02. These results are used to evaluate the effects of block grant provisions in the recently enacted welfare reform legislation.