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IRP Discussion Paper Abstracts - 2005

Full Text: DP 1313-05

This paper uses a unique dataset, created by matching administrative data from public assistance records, unemployment insurance records, and federal tax returns for a sample of California residents, to study the employment effects of the earned income tax credit (EITC). At the core of our empirical analysis is a set of four tests that we use to assess the causal effects of the EITC on employment.

The first test is based on the intuition that if the EITC alters employment, all else being equal, employment rates for two-or-more child families should grow relative to the employment rates of one-child families, as credit amounts available to these groups of families diverged over the 1990s. The second test examines whether or not people eligible for the EITC actually file tax returns and claim it. The third test is based on the intuition that, if the EITC, and not other factors such as the strong economy in the 1990s, is causing employment differences between families with two or more children relative to those with one child, we should expect to see no employment differences (after conditioning on other characteristics) between families with two children and families with three or more children, since the EITC did not change differentially for the latter two groups. The fourth test conditions the sample on those who do not file tax returns and again examines employment changes in the 1990s for families with two or more children relative to families with one child.

Using fixed-effects empirical employment models estimated on a sample of single-parent families, our coefficient estimates are consistent with the EITC having a substantial, positive effect on the employment of families who have used or will use welfare.

Full Text: DP 1312-05

This report uses meta-analysis, a set of statistically based techniques for combining quantitative findings from different studies, to synthesize estimates of program effects from random assignment evaluations of welfare-to-work programs and to explore the factors that best explain differences in the programs' performance. The analysis is based on data extracted from the published evaluation reports and from official sources. All the programs included in the analysis targeted recipients of Aid to Families with Dependent Children (AFDC; now called Temporary Assistance for Needy Families, TANF). The objective of the analysis is to establish the principal characteristics of welfare-to-work programs that were associated with differences in success, distinguishing between variations in the services received, differences in the characteristics of those who participated in each program, and variations in the socioeconomic environment in which the programs operated.

Separate meta-analyses of both voluntary and mandatory programs were conducted. Voluntary programs provide services (e.g., help in job search, training, and remedial education) for those who apply for them, and they sometimes provide financial incentives to encourage work. Mandatory programs are targeted at recipients of government transfer payments. They also provide employment-oriented services and sometimes provide financial work incentives, but differ from voluntary programs by requiring participation in the services by potentially subjecting individuals assigned to the program to fiscal sanctions (i.e., reductions in transfer payments) if they do not cooperate.

This study uses a unique database, assembled specifically for synthesizing findings from evaluations of welfare-to-work programs. The data used in the study are from 27 random assignment evaluations of mandatory welfare-to-work programs for AFDC applicants and recipients and four random assignment evaluations of voluntary welfare-to-work programs for AFDC recipients.

Much of the analysis was devoted to determining why some programs were more successful than others. Among the more important conclusions concerning mandatory welfare-to-work programs that were reached are the following:

• Three program features appear to be positively related to the effectiveness of mandatory welfare-to-work interventions: increased participation in job search, the use of time limits, and the use of sanctions. The sanction impact is only important in the first couple of years after entry into a program.
• Financial incentives decrease impacts on whether AFDC is received and on the amount of AFDC that is received, but do not improve impacts on labor market outcomes.
• The evidence is somewhat mixed over whether increases in participation in basic education, vocational education, and work experience increase program effectiveness. However, in general the findings do not support putting additional resources into these activities.
• It is not clear whether the effectiveness of mandatory welfare-to-work programs has improved over time.
• Mandatory welfare-to-work programs appear to do better in strong labor markets than in weak ones.
• Because generous state AFDC programs (represented in the analysis by the size of the maximum AFDC payment for which a family of three is eligible) reduce incentives to leave the welfare rolls, it was anticipated that the relationship between AFDC generosity and program impacts on the receipt of AFDC would be negative. However, the evidence on this relationship is mixed, varying with the statistical procedures used to test the hypothesis.
• A typical mandatory welfare-to-work program appears to have a positive effect on all four program impact measures for five to seven years after random assignment, although the impacts begin to decline after two or three years.
• In general, mandatory welfare-to-work programs appear to be more effective in serving relatively more disadvantaged caseloads than more advantaged caseloads-for example, AFDC recipients (rather than applicants), program group members without recent employment experience (rather than program group members with recent employment experience), and long-term (rather than short-term) participants in AFDC. However, similar evidence of a differential impact for program group members with and without a high school diploma is lacking. Moreover, there is some evidence of a positive relationship between program impacts and the average age of persons in the caseload.

The research presented in this report suggests a number of conclusions about welfare-to-work programs. One that particularly stands out is that although there are a few welfare-to-work programs that may be worth emulating, most such programs by themselves are unlikely to reduce the size of welfare rolls by very much or to improve the lives of most program group members and their children very substantially. Thus, they must be coupled with other policies, such as earnings subsidies.

Full Text: DP 1311-05

This paper exploits a new source of variation in Head Start funding to identify the program's effects on health and schooling. In 1965 the Office of Economic Opportunity (OEO) provided technical assistance to the 300 poorest counties in the U.S. to develop Head Start funding proposals. The result was a large and lasting discontinuity in Head Start funding rates at the OEO cutoff for grant-writing assistance, but no discontinuity in other forms of federal social spending. We find evidence of a large negative discontinuity at the OEO cutoff in mortality rates for children ages 5-9 from causes that could be affected by Head Start, but not for other mortality causes or birth cohorts that should not be affected by the program. We also find suggestive evidence for a positive effect of Head Start on educational attainment in both the 1990 Census, concentrated among those cohorts born late enough to have been exposed to the program, and among respondents in the National Education Longitudinal Study of 1988.

Full Text: DP 1310-05

The Earned Income Tax Credit (EITC) is the largest cash or near-cash U.S. antipoverty program, but a large fraction of its payments appear to go to taxpayers who are not eligible for the credit. The most recent study of EITC noncompliance (for tax year 1999) found that of the $31.3 billion claimed in EITC, between $8.5 and $9.9 billion, or 27.0 to 31.7 percent of the total, exceeded the amount to which taxpayers were eligible. Of these errors, the most common problem was that EITC-qualifying children failed to live for at least six months with the taxpayer claiming the child. Tax returns do not collect information on the location of children during the year. Consequently, absent additional information, the Internal Revenue Service (IRS) has little ability to scrutinize EITC qualifying-child claims before the EITC is paid out.

Given this problem, the 1997 federal budget bill directed the Secretary of the Treasury and the Secretary of Health and Human Services to use the Federal Case Registry of child support orders (FCR) to improve the accuracy of the child support and tax systems. The 2001 tax bill pushed this provision further, giving the IRS authority to apply "math error procedures" to tax returns claiming the EITC if, according to the FCR, the taxpayer is listed as owing child support on behalf of the EITC-qualifying child. Eight years after the IRS was granted access to the FCR, we know little about the value of this provision.

In this paper we use a unique dataset containing federal individual income tax returns, Unemployment Insurance data, state child support data, and data collected by hand from Wisconsin courthouses to examine EITC compliance and participation. We find, as expected, that the recipients of child support awards make most EITC claims. Nevertheless, a substantial number of claims are made by adults listed as the court-ordered payor, or are made by adults not identified in the state case registry. Simple calculations extrapolating Wisconsin's experience to the rest of the country suggests that as much as $1.5 billion of noncompliant EITC claims could possibly be identified, though there are several reasons to regard this as an upper bound. The potentially erroneous claims are much larger than the EITC that likely would have been received by the child-support payees (recipients) had they instead made the claims.

We also find that 40 percent of child support recipients who appear entitled to the credit may not be receiving it. An upper-bound estimate suggests that as much as $70 million (or $1,500 per recipient) may go unclaimed in Wisconsin. Outreach focusing on the availability of the credit and how to receive it may be a low-cost way of augmenting the economic resources of families with child support awards.

Full Text: DP 1309-05

Poverty rates are highest in the most urban and most rural areas of the United States, and are higher in nonmetropolitan than metropolitan areas. Yet, perhaps because only one-fifth of the nation's 35 million poor people live in nonmetropolitan areas, rural poverty has received less attention than urban poverty from both policymakers and researchers. We provide a critical review of literature that examines the factors affecting poverty in rural areas. We focus on studies that explore whether there is a rural effect, i.e., whether there is something about rural places above and beyond demographic characteristics and local economic context that makes poverty more likely in those places. We identify methodological concerns (such as endogenous membership and omitted variables) that may limit the validity of conclusions from existing studies that there is a rural effect. We conclude with suggestions for research that would address these concerns and explore the processes and institutions in urban and rural areas that determine poverty, outcomes, and policy impacts.

Full Text: DP 1308-05

We use data from the 2000 Mexican Census to examine how the educational and socioeconomic status of Mexican immigrants to the United States compares to that of nonmigrants in Mexico. Our primary conclusion is that migrants tend to be less educated than non-migrants. This finding is consistent with the idea that the return to education is higher in Mexico than in the United States, and thus the wage gain to migrating is proportionately smaller for higher-educated Mexicans than it is for lower-educated Mexicans. We also find that the degree of negative selection of migrants is stronger in Mexican counties that have a higher return to education.

Full Text: DP 1307-05

In this paper we review the evidence on four approaches to improving job retention and advancement among low-income working adults: (1) financial incentives and supports; (2) case management and service provision, often by labor market intermediaries; (3) skill development strategies; and (4) employer-focused efforts, such as sectoral strategies and career ladder development at private firms. Within each category, we find at least some evidence of positive effects on retention or advancement. Among the most promising approaches are the use of labor market intermediaries for job placements, the use of community colleges for training, and a variety of efforts that involve local employers. Mixed strategies that combine strong financial incentives and supports with labor market services and training also show promise.

Full Text: DP 1306-05

This paper extends and synthesizes the various approaches used in the recent welfare migration literature to both offer the most comprehensive set of tests to date for welfare migration and to determine the relative importance of short-distance moves in welfare migration flows. The current study follows on the finding of McKinnish (2005) of welfare migration effects obtained by comparing welfare participation at state borders to state interiors. This identification strategy is extended to micro-data from the 1980 and 1990 Decennial Censuses and combined with the demographic comparisons used elsewhere in the welfare migration literature. While there are some exceptions, the results are largely consistent with the presence of welfare migration effects and the substantial importance of short-distance moves in welfare-induced migration flows.

Full Text: DP 1305-05

Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1 percent and reading test scores by 3.6 percent of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications.

Full Text: DP 1304-05

This paper examines the relationship between job sprawl and the spatial mismatch between blacks and jobs. Using data from a variety of sources including the U.S. Census and the ZIP Code Business Patterns of the U.S. Department of Commerce, I control extensively for metropolitan area characteristics and other factors. In addition, I use metropolitan area physical geography characteristics as instruments for job sprawl to address the problem of simultaneity bias. I find a significant and positive effect of job sprawl on mismatch conditions faced by blacks that remains evident across a variety of model specifications. This effect is particularly important in the Midwest and West, and in metropolitan areas where blacks' share of the population is not large and where blacks' population growth rate is relatively low. The results also indicate that the measure of mismatch used in this analysis is highly correlated across metropolitan areas, with blacks' employment outcomes in the expected direction.

Full Text: DP 1303-05

Recent changes in American public assistance programs have emphasized the role of work. Employer subsidies such as the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (WtW) are designed to encourage employment by reimbursing employers for a portion of wages paid to certain welfare and food stamp recipients, among other groups. In this paper I develop a simple dynamic search model of employment subsidies and then test the model's implications for the employment outcomes of WOTC- and WtW-subsidized workers. My model predicts that subsidized workers will have higher rates of employment and higher wages than equally productive unsubsidized workers, and it highlights some possible effects of the subsidy on job tenure. I test these predictions using a unique administrative data set from the state of Wisconsin. These data provide information on demographic characteristics, employment histories, and WOTC and WtW participation for all welfare and food stamp recipients in the state for the years 1998-2001. My ability to precisely identify the workers who are subsidized allows me to distinguish the effects of program participation from those of eligibility. I estimate the employment, wage, and job tenure effects of the WOTC and WtW using propensity score matching estimation, which allows me to control for selection into the programs while maintaining fewer functional form assumptions than typical methods. I find that the WOTC and WtW have limited effects on the labor market outcomes of the disadvantaged population. While the programs may modestly increase employment and wages in the short run, these gains do not persist over time.

Full Text: DP 1302-05

Since the mid-1990s the state of Wisconsin has operated a voluntary paternity acknowledgment process, which allows the fathers of nonmarital children born in the state to voluntarily acknowledge their paternity by signing a notarized form, instead of going through a judicial hearing. The premise behind this program is that by reducing obstacles to establishing paternity the state can encourage unmarried fathers to increase their financial and nonfinancial participation in their children's lives. This report examines the relationship between the use of paternity acknowledgment by fathers and two measures of their subsequent participation in the responsibilities of child-rearing: paying child support and having the children live with them (as shown by placement decisions).

Examining differences in child support and placement outcomes between cases in which paternity was voluntarily acknowledged and cases in which paternity was adjudicated is complicated by the fact that the two groups of fathers are different in other relevant ways. Without controlling for other differences, we found that adjudicated fathers actually paid $150 more per year in child support than did voluntarily acknowledged fathers, but this finding did not take into account the fact that a much lower percentage of voluntary paternity cases have a child support order (due in part to the higher likelihood that voluntary paternity fathers are living with the mother). When we limit our analysis to fathers who have orders, the voluntary paternity fathers are 10 percentage points more likely to pay, and they pay about $250 more per year than do adjudicated fathers.

Differences in the likelihood of having an order are not the only distinctions between voluntary and adjudicated cases that require consideration. Children with voluntary paternity acknowledgment are more likely to be an only child and to live outside Milwaukee than are children who have adjudicated paternity. Acknowledged children are younger at the time when paternity is established and younger at the time the child support petition is filed. They have parents with higher earnings, and their parents are less likely to have spent time on public assistance. Adjudicated paternity children appear more often to have black parents and parents who were not living together at the birth of the child, whereas children with voluntary paternity acknowledgment are more likely to have white parents and parents who lived together at birth or at the time of paternity establishment.

We used multivariate models to control for differences in these background characteristics. With the controls, voluntary paternity acknowledgment cases, as compared to adjudicated cases, are associated with a lower incidence of child support orders, higher likelihood of payment when an order exists, no significant difference in the level of payment when any is paid, and a greater likelihood of shared child placement. Cases at the average in all other characteristics have a 77 percent probability of paying child support if paternity was adjudicated and an 82 percent probability of paying child support if paternity was voluntary.

Full Text: DP 1301-05

We analyze the relationship between prenatal WIC participation and birth outcomes in New York City from 1988 to 2001. The analysis is unique for several reasons. First, we have information on over 800,000 births to women on Medicaid, the largest sample ever used to analyze prenatal participation in WIC. Second, we focus on measures of fetal growth distinct from preterm birth, since there is little clinical support for a link between nutritional supplementation and premature delivery. Third, we restrict the primary analysis to women on Medicaid who have no previous live births and who initiate prenatal care within the first four months of pregnancy. Our goal is to lessen heterogeneity between WIC and non-WIC participants by limiting the sample to highly motivated women who have no experience with WIC from a previous pregnancy. Fourth, we analyze a large subsample of twin deliveries. Multifetal pregnancies increase the risk of anemia and fetal growth retardation and thus may benefit more than singletons from nutritional supplementation. We find no relationship between prenatal WIC participation and measures of fetal growth among singletons. We find a modest pattern of association between WIC and fetal growth among U.S.-born black twins. Our findings suggest that prenatal participation in WIC has had a minimal effect on adverse birth outcomes in New York City.

Full Text: DP 1300-05

Multiple-partner fertility might not be a significant policy issue if the number of children affected was fairly small. However, we show here that family complexity resulting from multiple-partner fertility is quite common, and has important implications for understanding child support outcomes and for designing and evaluating welfare and family policy. Using a unique set of merged administrative data, this paper provides the first comprehensive documentation of levels of family complexity among a broad sample of welfare recipients. We examine the extent to which complexity is associated with systematically different child support outcomes and outline the implications of family complexity for policy.

Full Text: DP 1299-05

We examine the effect of macroeconomic performance on poverty in the United States during the 1980s and 1990s. Our study advances research on this issue in a variety of ways: we utilize variation across the states rather than relying on over-time trends for the country as a whole; we analyze cross-state variation in both levels and change over time; we disentangle the impact of three different aspects of macroeconomic performance: economic output (per capita gross state product), employment, and unemployment; we investigate causal mechanisms more carefully than is often the case in poverty analyses, focusing on work hours and wages; we consider both absolute and relative poverty; we base our poverty measure on pretax-pretransfer income; we use a poverty measure that incorporates both the poverty rate and the poverty gap; and we focus on the working-age population. Our findings highlight the importance of employment for poverty reduction. Employment contributed to lower absolute and relative poverty by boosting hours worked and wages in low-income households. Per capita gross state product similarly contributed to lower absolute poverty by increasing hours worked and low-end wage levels, but it had very little impact on relative poverty because it also was associated with increased wage inequality. Unemployment had little or no effect on poverty.

Full Text: DP 1298-05

In all developed countries, single-parent families are particularly vulnerable to poverty. In contrast to many European countries that provide some guaranteed income support for children, the United States has emphasized private responsibility, increasingly requiring child support from the other parent. The reliance on a private approach raises several questions concerning the adequacy and distribution of child support. Using detailed administrative records for virtually all mothers with new child support orders in one U.S. state in 2000, we analyze child support receipts over the subsequent three years. We find that most mothers with child support orders receive support, and many receive substantial amounts. However, the amount received varies substantially from year to year. Moreover, we find substantial instability within years—a characteristic of private support that has been difficult to measure with prior data. Our analysis of child support outcomes across the income distribution shows remarkably similar proportions of families receiving at least some support. Considering amounts received over the distribution of pre-child-support income, we find a U-shaped pattern, with amounts declining slightly with income over the first three deciles, and then increasing steadily. Lower-income families are also less likely to receive regular child support. Nonetheless, child support plays an important role in the income packages of many low-income families, reducing pre-child-support poverty rates by 16 percent and closing the poverty gap by an average of 44 percent in 2001.

Full Text: DP 1297-05

There is surprisingly limited information on how much individuals know about the policy rules that could affect them, either in general or in evaluations of new programs. In this article we examine the level of knowledge that participants in a Wisconsin child support and welfare demonstration had about child support policy rules. We find very low levels of knowledge. Our results suggest that people tend to learn policy rules by experience; we find less consistent support for knowledge being primarily imparted through interactions with caseworkers. Implications of the lack of participants' knowledge for policy evaluations are discussed.

Full Text: DP 1296-05

Using data from the National Health Interview Survey for years spanning 1976 to 2001, this paper presents an age-period-cohort analysis of weight gain throughout the life cycle. We find that while all ages experienced an increase in the proportion overweight and/or obese (PO&O), the PO&O of young adults has grown at a faster rate than that of older age groups. We find that the increases in Body Mass Index are primarily due to period effects, not cohort or age effects. From the ordered logistical regression analyses, we find that protective influence of factors such as education, income, and age on an individual's Body Mass Index have decreased over time. The analyses suggest that the increase in PO&O is a phenomenon that all demographic groups in the United States have experienced.

Full Text: DP 1295-05

Studies examining the effectiveness of welfare-to-work programs present findings that are mixed and sometimes at odds, in part due to research design, data, and methodological limitations of the studies. We aim to substantially improve on past approaches to estimate program effectiveness by using administrative data on welfare recipients in Missouri and North Carolina to obtain separate estimates of the effects of participating in sub-programs of each state's welfare-to-work program. Using data on all women who entered welfare between the second quarter of 1997 and fourth quarter of 1999 in these states, we follow recipients for sixteen quarters and model their quarterly earnings as a function of demographic characteristics, prior welfare and work experience, the specific types of welfare-to-work programs in which they participate, and time since participation. We focus primarily on three types of subprograms-assessment, job readiness and job search assistance, and more intensive programs designed to augment human capital skills-and use a variety of methods that allow us to compare how common assumptions influence results. In general, we find that the impacts of program participation are negative in the quarters immediately following participation but improve over time, in most cases turning positive in the second year after participation. The results also show that more intensive training is associated with greater initial earnings losses but also greater earnings gains in the long run.

Full Text: DP 1294-05

In contrast to the standard individualistic approach to employment services delivery, we present evaluation results for an employment program in which both partners in a couple relationship simultaneously participate. We find that participating mothers had larger gains in employment and earnings and decreases in TANF receipt immediately upon program exit relative to mothers who participated as individuals. These gains eroded in the two years following program completion. Fathers show similar though weaker results. We suggest directions for future couples-oriented employment programs based on couples interventions in other fields and encourage program developers to consider the range of mechanisms associated with a focus on couples, including potential unintended consequences.

Full Text: DP 1293-05

We use propensity scores to evaluate the effect of Food Stamps on food insecurity, a measure of inadequate food supply. Data come from the Early Childhood Longitudinal Study-Kindergarten Cohort. Propensity scores offer an advantage over traditional linear regression methods because they address omitted variable bias associated with Food Stamp use by matching similarly situated treatment and control group members, and estimating mean differences within these matched groups. We find that the program does not decrease the probability of being food insecure, but it may lessen the severity of the problem. We also note that propensity scores rest on several stringent assumptions and should be employed with caution.

Full Text: DP 1292-05

Who gets what from government is partly determined by who applies for government programs. Despite the importance of the claiming process, political scientists have said little about the factors that influence citizen demands on government programs. We test the hypothesis that state environments systematically shape aggregate rates of welfare demand making by testing a model of welfare claiming in the Social Security Disability Insurance and the Supplemental Security Income programs. Our findings show that in addition to economic need for benefits, the density of civil society organizations, the political ideology of state officials, and the generosity of state-run public assistance programs shape the amount and direction of citizen demands on the welfare system. Although commonalities exist in which variables explain welfare claiming, relationships vary in interesting ways across programs and stages of the claiming process, highlighting the need for a theoretical model of claiming behavior that takes into account such differences.