Welfare Dynamics Under Time Limits

Among the most important changes brought about by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) is the imposition of time limits. In this paper, we analyze a simple model in which a potential welfare recipient chooses how to allocate her time-limited endowment of benefits so as to maximize her expected lifetime utility. Not surprisingly, the model reveals that time limits provide an incentive for the consumer to conserve, or bank, her benefits. More interesting is the prediction that these incentives to conserve one's benefits vary inversely with the age of the youngest child in one's family. This implies that the reduction in welfare payments that results from PRWORA will fall disproportionately on families with young children. We estimate age group-specific effects of time limits and test the prediction of the model using data from a welfare reform demonstration in Florida. Subject to some assumptions that are necessary to distinguish the effects of time limits from the effects of other provisions of the demonstration, we find that time limits indeed reduce welfare use by the greatest amount among the families with the youngest children. Moreover, time limits have substantial effects on welfare utilization, reducing monthly utilization probabilities by 19 percent. Time limits lead families to exit the welfare rolls well before they exhaust their benefits, suggesting that welfare mothers are rational in the sense of being forward-looking.

The Impact of Grading Standards on Student Achievement, Educational Attainment, and Entry-Level Earnings

Despite recent theoretical work and proposals from educational reformers, there is little empirical work on the effects of higher grading standards. In this paper we use data from the High School and Beyond survey to estimate the effects of grading standards on student achievement, educational attainment, and entry level earnings. We consider not only how grading standards affect average outcomes but also how they affect the distribution of educational gains by skill level and race/ethnicity. We find that higher standards raise test scores throughout the distribution of achievement, but that the increase is greatest toward the top of the test score distribution. Higher standards have no positive effect on educational attainment, however, and indeed have negative effects on high school graduation among blacks and Hispanics. We suggest a relative performance hypothesis to explain how higher standards may reduce educational attainment even as they increase educational achievement.

The Effect of Welfare Payments on the Marriage and Fertility Behavior of Unwed Mothers: Results from a Twins Experiment

We study one aspect of the link between welfare and unwed motherhood: the relationship between benefit levels and the time-to-first-marriage and time-to-next-birth among women whose first" child was born out of wedlock. We use twin births to generate effectively random variation in welfare benefits among mothers within a state, which allows us to control for unobservable characteristics of states that typically confound the relationship between welfare payments and behavior. The twins approach yields evidence that higher base levels of welfare benefits: (1) lead initially unwed white mothers to forestall their eventual marriage; and (2) lead initially unwed black mothers to hasten their next birth. The magnitudes of these effects are small, however. Moreover, we find no evidence that the incremental benefit paid upon the birth of an additional child affects fertility.

Market Wages and Youth Crime

Youth crime is widespread. To study the effect of market wages on youth crime, I analyze a time-allocation model in which consumers face parametric wages and diminishing marginal returns to crime. Under these assumptions, an individual who works will commit crime if the returns to the first hour of crime exceed his market wage. This decision rule imposes considerable structure on the econometric model, which I estimate using data from the National Longitudinal Survey Youth Cohort. The empirical model provides estimates of the determinants of criminal returns and of the wage responsiveness of criminal participation. Young men's behavior appears to be very responsive to price incentives. My estimates suggest that falling real wages may have been an important determinant of rising youth crime over the past two decades. Moreover, wages explain an important component of the racial differential in criminal participation, and they largely explain the age distribution of crime.

Social Security and Divorce Decisions

People who have divorced are entitled to Social Security spousal benefits if their marriages lasted at least ten years. This paper uses 1985–1995 Vital Statistics data and the 2008–2011 American Community Surveys to analyze how this rule affects divorce decisions. I find evidence that the ten-year rule results in a small increase in divorces for the general population; however, the effects vary greatly by age. Divorce decisions change very little for people under the age of 35. For people 55 and older, however, divorces increase by approximately 20 percent around the ten-year cutoff, which leads to an increase in the likelihood of being divorced of 11.7 percent at ten years of marriage. For people between the ages of 35 and 55, who account for over half of divorces, the likelihood of being divorced increases by almost 6 percent as marriages cross the ten-year mark. This heterogeneity across ages likely exists because older people are more focused on retirement and have less time to remarry. These results indicate many people delay divorcing because they need Social Security benefits

School Expenditures and Post-schooling Earnings: Evidence from High School and Beyond.

Studies based on inputs measured at the state level generally report that school expenditures have substantial effects on students' adult wages, whereas studies based on less aggregated measures report small effects. The author uses wage data from High School and Beyond to analyze this discrepancy, and to estimate the effect of school expenditures on students' post-schooling earnings. The author finds that the discrepancy in the literature stems mostly from two factors: measurement error in district-level expenditures and omitted state effects in the earnings regression. The author also finds that the effect of school expenditures on earnings is significant but small. A 10% increase in school spending would increase students' adult wages by only 0.68%. Copyright 1996 by MIT Press.

Market Wages and Youth Crime.

To study the problem of widespread youth crime, the author analyzes a time-allocation model in which consumers face parametric wages and diminishing marginal returns to crime. The theory motivates an econometric model that he estimates using data from the National Longitudinal Survey of Youth. The author's estimates suggest that youth behavior is responsive to price incentives and that falling real wages may have been an important determinant of rising youth crime during the 1970s and 1980s. Moreover, wage differentials explain a substantial component of both the racial differential in criminal participation and the age distribution of crime. Copyright 1998 by University of Chicago Press.

Does School Quality Explain the Recent Black/White Wage Trend?

Around 1980, the trend toward racial wage convergence essentially stopped. The author asks whether this break in the convergence trend can be explained by school quality. Department of Education surveys provide earnings data for the high school class of 1972 in 1979 and the class of 1980 in 1986, both linked to data from the respondents' high schools. By several measures, differences between schools attended by blacks and whites were already rather small in the 1970s. Furthermore, the author finds that measurable school inputs generally have little effect on wages. Thus school quality explains little of the recent black/white wage trend. Copyright 1996 by University of Chicago Press.