THE EFFECT OF WELFARE ASSET RULES ON AUTO OWNERSHIP, EMPLOYMENT, AND WELFARE PARTICIPATION: A LONGITUDINAL ANALYSIS

Lorien Rice (lrice@mills.edu) and Cynthia Bansak

Contemporary Economic Policy, 2014, vol. 32, issue 2, 306-333

Abstract: type="main" xml:lang="en">

This paper investigates how asset tests for welfare eligibility affect auto ownership, employment, and welfare participation for single mothers without a college degree. We combine longitudinal data from the 1996 Survey of Income and Program Participation with data on state-level welfare program rules from the Urban Institute and data on state-level controls to test whether these single mothers were more likely to (1) own a car, (2) be employed, and (3) be off of welfare, depending on the welfare asset rules instituted in their state. We find evidence that, taken as a group, the asset rules have a statistically significant effect on the probability of car ownership. Ordinary least squares results and cross-sectional two-stage least squares (2SLS) results using the asset rules to instrument for car ownership show a large, positive, statistically significant effect of car ownership on employment. However, in 2SLS models controlling for prior car ownership and prior employment, the asset instruments are weaker and we do not find an effect of car ownership on employment. Of significance for policy makers, we find that the asset rules do not have a statistically significant joint effect on welfare participation, even after addressing possible endogeneity. (JEL I38, J68, J08)

Date: 2014
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