The Effects of Welfare Reform in Rural Minnesota: Experimental Findings from the Minnesota Family Investment Program

Unlike well-documented patterns in urban areas, welfare caseload declines in rural areas have not been paralleled with increases in employment or reductions in poverty. Recognizing how the effects of welfare policy may differ given the important differences in the lives and work behavior of urban versus rural low-income families has been relatively understudied. This paper examines the effects of an experimental welfare waiver evaluation - the Minnesota Family Investment Program (MFIP) - on the employment and earnings of long-term welfare recipients in rural and urban Minnesota. In contrast to its large and consistent effects on employment and earnings in urban counties, MFIP's effects on rural recipients' employment and earnings faded considerably over time, particularly in one rural county. Differences in observable characteristics between rural and urban recipients, particularly prior marital status and work experience, explain the smaller effects of MFIP in three of the rural counties. However, and surprisingly, these factors explain only a part of the story in the one rural county that was affected the least positively by MFIP. These findings highlight the role that regional differences should play in formulating welfare and employment policies.