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Work Requirements and Income Transfers

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  • Christopher B. Colburn

    (Old Dominion University)

Abstract

Recent structural changes m the Aid of Families with Dependent Children (AFDC) program brought about by the 1988 Family Support Act mandate work requirements and training for many income transfer recipients. The article uses a theoretical analysis that predicts changes in the level and composition of income transfers resulting from the introduction of these policy changes. The model incorporates the labor supply decision of potential income transfer recipients into a public choice model that describes the process by which the level of income transfer per recipient for each state is determined. The statistical analysis involved the pooling of data on labor force participation, wage rates, and other variables relevant to the labor supply model of potential income transfer recipients with the level of transfers, guarantees, donor and recipient characteristics, and information on the marginal cost of income redistribution from the public choice model. A panel data set of time series for each state was used to estimate how sensitive the income transfer is to changes in the labor supply of welfare recipients. Policy implications of the analysis are offered that focus on the implementation of the requirement that a percentage of income transfer recipients work on the level of AFDC transfer that states provide .

Suggested Citation

  • Christopher B. Colburn, 1993. "Work Requirements and Income Transfers," Public Finance Review, , vol. 21(2), pages 141-162, April.
    • Handle: RePEc:sae:pubfin:v:21:y:1993:i:2:p:141-162
    DOI: 10.1177/109114219302100202
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    References listed on IDEAS

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    1. Fraker, Thomas & Moffitt, Robert, 1988. "The effect of food stamps on labor supply : A bivariate selection model," Journal of Public Economics, Elsevier, vol. 35(1), pages 25-56, February.
    2. Danziger, Sheldon & Haveman, Robert & Plotnick, Robert, 1981. "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 975-1028, September.
    3. Fraker, Thomas & Devaney, Barbara & Cavin, Edward, 1986. "An Evaluation of the Effect of Cashing Out Food Stamps on Food Expenditures," American Economic Review, American Economic Association, vol. 76(2), pages 230-234, May.
    4. Keeley, Michael C, et al, 1978. "The Estimation of Labor Supply Models Using Experimental Data," American Economic Review, American Economic Association, vol. 68(5), pages 873-887, December.
    5. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, vol. 66(3), pages 359-371, June.
    6. Plotnick, Robert D. & Winters, Richard F., 1985. "A Politico-Economic Theory of Income Redistribution," American Political Science Review, Cambridge University Press, vol. 79(2), pages 458-473, June.
    7. Frank Levy, 1979. "The Labor Supply of Female Household Heads, or AFDC Work Incentives Don't Work Too Well," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 76-97.
    8. Zeckhauser, Richard J, 1971. "Optimal Mechanisms for Income Transfer," American Economic Review, American Economic Association, vol. 61(3), pages 324-334, June.
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    Cited by:

    1. Smith, Mark W, 1999. "Should we expect a race to the bottom in welfare benefits? Evidence from a multistate panel, 1979-1995," MPRA Paper 10125, University Library of Munich, Germany.

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