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The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality

Robert Moffitt (), David Ribar () and Mark Wilhelm ()

No 5774, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Welfare benefits in the U.S. have experienced a much-studied secular decline since the mid-1970s. We explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution: we posit that voters prefer benefits which are tied to low-skilled wages. We test the hypothesis using a 1969-1992 panel of state-level data. An additional contribution of" our analysis is the use of General Social Survey data on voter preferences for welfare which we combine with Current Population Survey data to determine the voter in each state who has the median preferred welfare benefit level. Our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits.

JEL-codes: H72 I38 (search for similar items in EconPapers)
Date: 1996-09
Note: PE
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Published as Journal of Public Economics 68 (1998) 421-452

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Journal Article: The decline of welfare benefits in the U.S.: the role of wage inequality (1998) Downloads
Working Paper: The Decline of Welfare Benefits in the US: The Role of Wage Inequality (1998)
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