Measuring the effects of welfare time limits

Abstract

This paper develops a simple regression model that incorporates the behavioral dynamics of time limits and is estimable by panel data techniques. By relating this model to reduced-form analysis, I clarify an implicit assumption that underlies a popular difference-in-differences (DID) specification, which understates the overall effects of time limits. I also find that a considerable amount of dynamics is due to individuals reducing welfare use, as their stock of remaining welfare eligibility depletes. This generates more plausible predictions related to counterfactuals, cumulative welfare use patterns, and mechanical termination of benefits.