The 1993 EITC Expansion and Low-Skilled Single Mothers’Welfare Use Decision

Hau Chyi

No 2013-10-14, Working Papers from Wang Yanan Institute for Studies in Economics (WISE), Xiamen University

Abstract: Previous studies on low-skilled single mothers generally focus on the binary decisions of either welfare use or work. However, work among welfare participants has increased steadily since the mid 1990s. This study estimates the joint probability of the two decisions using a bivariate probit model. I investigate the role of the 1993 EITC expansion on the decline of welfare caseloads.Using monthly welfare use and work information from the Study of Income and Program Participation, I find that the 1993 EITC expansion has at least the same effect on reducing welfare use as the welfare reform initiatives, in particular, welfare time limits. Moreover, the elasticity estimates indicate that single mothers, especially those who were not employed and dependent solely on welfare before the expansion, were more responsive to the EITC expansion than to welfare time limits. Finally, the increase in work among welfare participants is due to the relative ineffectiveness of the policies in reducing the net population of those who are on welfare and work simultaneously.

Date: 2013-10-14
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