We investigate the effect of welfare reform on intergenerational welfare participation, using mother-daughter pairs in the Panel Study of Income Dynamics. We find that a mother’s Aid to Families with Dependent Children/Temporary Assistance for Needy Families (AFDC/TANF) participation increased her daughter’s odds of adult participation in that program by roughly 25 percentage points or more, but that welfare reform attenuated this transmission by at least 50%. However, there is no diminution of transmission after welfare reform when we consider the wider safety net or other outcomes. Daughters who grew up with mothers on AFDC/TANF were no better off after reform, with substitution toward other welfare programs over generations.
|Number of pages
|Journal of Political Economy
|Published - Mar 2022
Bibliographical noteFunding Information:
Welfare in the United States through the 1980s was largely defined by the AFDC program, which was established as part of the Social Security Act of 1935 to assist low-income families with children under age 18. Eligibility for assistance was determined by an income test, a liquid asset test, and a vehicle asset test. The program was financed by a federal-state matching grant program, and states had limited authority on program design, such as setting benefit standards (maximum benefit levels increasing with family size) and need standards used in assigning income eligibility. Beginning in the 1960s, states could apply for waivers from federal rules to experiment with program features. Several states filed waiver applications under President George H. W. Bush’s administration, which accelerated under the Clinton administration, so that 43 states had waivers by 1996 (Grogger and Karoly 2005). The waivers were far reaching, including both strengthening and expanding of preexisting policies (e.g., work requirements and sanctions on benefits for failing to work or participate in a training program), as well as new policies aimed at family responsibility (e.g., caps on the generosity of benefits by family size and time limits on benefit receipt). Some of the new policies actually expanded eligibility, such as higher asset limits and earnings disregards for benefit determination, but the majority were designed to restrict program access. Time-limit waivers, in particular, were introduced to break long-term spells on AFDC, and in turn to reduce exposure of children to parental use of welfare. These waivers were codified into federal law with the passage of PRWORA in 1996 that replaced AFDC with TANF. Unlike AFDC, TANF is funded by a fixed block grant to states and eligibility is not an entitlement. Consequently, states were granted much greater authority in program design and there are vast differences across states in TANF policy.
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ASJC Scopus subject areas
- Economics and Econometrics