Marriage, Labor Supply and the Dynamics of the Social Safety Net

Hamish Low, Costas Meghir, Luigi Pistaferri and Alessandra Voena
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Hamish Low: University of Oxford
Costas Meghir: Yale University
Luigi Pistaferri: Stanford University
Alessandra Voena: Stanford University

No 2121R3, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper studies the impact of the social safety net on marriage, labor supply, and divorce. We specify and estimate a life-cycle model of single and married individuals to evaluate the welfare and behavioral effects of the 1996 PRWORA reform, which introduced time limits and work requirements. The model incorporates limited commitment between spouses, endogenous marriage and divorce, and human capital accumulation. We find that the reform led to a significant decline in welfare participation, an increase in employment, and a decrease in divorce rates, particularly for lower-educated women. Our results highlight the importance of accounting for the long-run impacts on household formation and intra-household insurance when evaluating welfare policy.

Pages: 79 pages
Date: 2025-11-01
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