Unemployment and Welfare Participation in a Structural VAR: Rethinking the 1990s in the United States (Revised)
Additional contact information
Corrado Andini: University of Rome 'La Sapienza' Department of Public Economics
HEW from EconWPA
The Council of Economic Advisers (1997) started a large research effort about the relationship between the US unemployment rate and the welfare participation rate, with special regard to the 1990s. In this paper, this relationship is examined in a structural VAR over the period of 1960-2000. It is found that the unemployment rate does not Granger-cause the welfare participation rate, while the converse is true. Moreover, a negative shock to the welfare participation rate predicts a reduction in the unemployment rate. These results are robust to State and year heterogeneity over the period of 1990-1998. A first implication is that - contrarily to the majority view - the decline of the welfare participation rate in the last decade should be mainly attributed to restrictive welfare reforms, not to the fall in the unemployment rate. Further, the political choice to reduce the welfare participation rate may have inflated the reduction in the unemployment rate.
Keywords: Welfare; Unemployment; VAR (search for similar items in EconPapers)
JEL-codes: I (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu
Note: Type of Document - pdf
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwphe:0501005
Access Statistics for this paper
More papers in HEW from EconWPA
Series data maintained by EconWPA ().