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Why is the rate of single‐parenthood lower in Canada than in the U.S.? A dynamic equilibrium analysis of welfare policies

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  • Nezih Guner
  • John Knowles

Abstract

A critical question in the design of welfare policies is whether to target aid according to household composition, as was done in the U.S. under the Aid to Families with Dependent Children (AFDC) program, or to rely exclusively on means‐testing, as in Canada. Restricting aid to single mothers, for instance, has the potential to distort behaviour along three demographic margins: marriage, fertility, and divorce. We contrast the Canadian and the U.S. policies within an equilibrium model of household formation and human capital investment on children. Policy differences we consider are eligibility, dependence of transfers on the number of children, and generosity of transfers. Our simulations indicate that the policy differences can account for the higher rate of single‐parenthood in the U.S. They also show that Canadian welfare policy is more effective for fostering human capital accumulation among children from poor families. Interestingly, a majority of agents in our benchmark economy prefers a welfare system that targets single mothers (as the U.S. system does), yet (unlike the U.S. system) does not make transfers dependent on the number of children. Une question critique dans le design des politiques sociales est à savoir s’il faut cibler l’aide selon la composition du ménage, comme on le fait aux Etats‐Unis dans le cadre du programme Aid to Families with Dependent Children (AFDC) ou s’en remettre exclusivement à une enquête sur les ressources disponibles. Limiter l’aide aux mères monoparentales, par exemple, peut influencer le comportement à la marge selon trois axes démographiques: mariage, fécondité, divorce. On compare les politiques canadienne et américaine dans le cadre d’un modèle d’équilibre de formation des ménages et d’investissement en capital humain dans les enfants. Les différences dans les politiques portent sur l’éligibilité, la dépendance des transferts sur le nombre d’enfants, et la générosité des transferts. Les simulations indiquent que les différences dans les politiques peuvent expliquer le plus haut taux de monoparentalité aux Etats‐Unis. On montre aussi que la politique canadienne est plus effective pour encourager l’accumulation du capital humain dans les enfants des familles pauvres. On note qu’une majorité des agents dans l’économie de référence préfère une politique qui cible les mères monoparentales (comme on le fait aux Etats‐Unis) mais qui (contrairement à ce qui se fait aux Etats‐Unis) ne rend pas les transferts dépendants du nombre d’enfants.

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  • Nezih Guner & John Knowles, 2009. "Why is the rate of single‐parenthood lower in Canada than in the U.S.? A dynamic equilibrium analysis of welfare policies," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(1), pages 56-89, February.
  • Handle: RePEc:wly:canjec:v:42:y:2009:i:1:p:56-89
    DOI: 10.1111/j.1540-5982.2008.01499.x
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    2. Matthias Doepke & Fabian Kindermann, 2019. "Bargaining over Babies: Theory, Evidence, and Policy Implications," American Economic Review, American Economic Association, vol. 109(9), pages 3264-3306, September.
    3. Eva Garcia-Moran & Zoe Kuehn, 2017. "With Strings Attached: Grandparent-Provided Child Care and Female Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 80-98, January.
    4. Hans Fehr & Daniela Ujhelyiova, 2013. "Fertility, Female Labor Supply, and Family Policy," German Economic Review, Verein für Socialpolitik, vol. 14(2), pages 138-165, May.
    5. Anindya Sen & Hideki Ariizumi, 2013. "Teen families, welfare transfers, and the minimum wage: evidence from Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(1), pages 338-360, February.
    6. Stefan Bauernschuster & Rainald Borck, 2012. "The Effect of Child Care on Family Structure: Theory and Evidence," CESifo Working Paper Series 3763, CESifo.
    7. Eva Garcia-Moran & Zoe Kuehn, 2017. "With Strings Attached: Grandparent-Provided Child Care and Female Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 80-98, January.
    8. García-Morán, Eva & Kuehn, Zoe, 2012. "With strings attached: Grandparent-provided child care, fertility, and female labor market outcomes," MPRA Paper 37001, University Library of Munich, Germany.
    9. García-Morán, Eva & Kuehn, Zoe, 2013. "With strings attached: Grandparent-provided child care and female labor market outcomes," MPRA Paper 48953, University Library of Munich, Germany.
    10. Bick, Alexander, 2011. "The quantitative role of child care for female labor force participation and fertility," MPRA Paper 31713, University Library of Munich, Germany.
    11. Doepke, Matthias & Kindermann, Fabian, 2014. "Intrahousehold Decision Making and Fertility," IZA Discussion Papers 8726, Institute of Labor Economics (IZA).

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