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THE EFFECT OF WELFARE ASSET RULES ON AUTO OWNERSHIP, EMPLOYMENT, AND WELFARE PARTICIPATION: A LONGITUDINAL ANALYSIS

Authors

  • LORIEN RICE,

    1. Rice: Department of Economics, Mills College, 5000 MacArthur Blvd., Oakland, CA 94613. Phone 510-430-3113, Fax 510-430-3361, E-mail lrice@mills.edu
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  • CYNTHIA BANSAK

    1. Bansak: Department of Economics, St. Lawrence University, 23 Romoda Drive, Canton, NY 13617. Phone 315-229-5428, Fax 315-229-5819, E-mail cbansak@stlawu.edu
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    • This project was supported by the National Poverty Center using funds received from the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, grant number 1 U01 AE000002-01. The opinions and conclusions expressed herein are solely those of the authors and should not be construed as representing the opinions or policy of any agency of the Federal government.
      We thank the Urban Institute for providing us with detailed state-level welfare asset limit rules, and we thank David Neumark and William Wascher for data on additional state policy variables. In addition, we are very grateful to Rebecca Blank, Steven Raphael, James Sullivan, Manuel Barron, and the participants in the 2009 National Poverty Center Small Grants Workshop for their comments on early versions of this work. We are also appreciative of the valuable feedback received from our anonymous referees.


Abstract

This paper investigates how asset tests for welfare eligibility affect auto ownership, employment, and welfare participation for single mothers without a college degree. We combine longitudinal data from the 1996 Survey of Income and Program Participation with data on state-level welfare program rules from the Urban Institute and data on state-level controls to test whether these single mothers were more likely to (1) own a car, (2) be employed, and (3) be off of welfare, depending on the welfare asset rules instituted in their state. We find evidence that, taken as a group, the asset rules have a statistically significant effect on the probability of car ownership. Ordinary least squares results and cross-sectional two-stage least squares (2SLS) results using the asset rules to instrument for car ownership show a large, positive, statistically significant effect of car ownership on employment. However, in 2SLS models controlling for prior car ownership and prior employment, the asset instruments are weaker and we do not find an effect of car ownership on employment. Of significance for policy makers, we find that the asset rules do not have a statistically significant joint effect on welfare participation, even after addressing possible endogeneity. (JEL I38, J68, J08)

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