Welfare Rules, Incentives, and Family Structure

In this study we provide a new examination of the incentive effects of welfare rules on family structure. Focusing on the AFDC and TANF programs, which have been most studied on this issue, we first emphasize that the literature, by and large, has assumed that the rules of those programs make a key distinction between married women and cohabiting women, but this is not a correct interpretation. In fact, it is the biological relationship between the children and any male in the household that primarily determines how the family is treated. In an empirical analysis conducted over the period 1996 to 2004 that correctly matches family structure outcomes to welfare rules, we find significant effects of some welfare rules on family structure. We also find that those effects are particularly strong among women on welfare. For all of our results, our findings indicate that the impact of welfare rules crucially hinges on the biological relationship of the male partner to the children in the household.