Welfare Benefits and Female Headship in U.S. Time Series

Abstract

A considerable amount of work has been done on the relationship between AFDC benefits and family structure in the United States. The evidence to date—based on cross-state variation in welfare benefits and family structure, often with state fixed effects—indicates that there is some nonzero effect of those benefits on marriage and fertility, although disagreement remains about the magnitude of the effect. It is undisputed, however, that time-series trends in family structure are not correlated in the direction that the cross-state evidence would suggest, because real benefits have been falling, even relative to wages, in aggregate time series. This paper reexamines the time-series evidence with particular attention to the role of wages in explaining trends in headship, and notes that the correct specification includes male as well as female wages. When both are controlled, welfare benefits have a slight positive impact on female headship even in time series. The results demonstrate the importance of labor market factors in explaining trends in female headship.