IRP Discussion Paper Abstracts - 2009

Notes: Abstracts are plain text. Downloadable papers are in Adobe Acrobat (.pdf) format.
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Income Poverty and Income Support for Minority and Immigrant Children in Rich Countries
Timothy M. Smeeding, Karen Robson, Coady Wing, and Jonathan Gershuny

Full Text: DP 1371-09

The Luxembourg Income Study (LIS) and the databases underlying the European Statistics on Income and Living Conditions (EU-SILC) allow estimates of the extent to which immigrant and nonimmigrant children are poor across a wide range of rich nations. These data also allow estimates of the effects of social transfers that reduce poverty amongst all families with children. For all of the fourteen countries in the combined sample, children in migrant families have greater market-income poverty rates and greater disposable income poverty rates than do children in native-born families by a factor of about 2 to 1. Still, safety nets are important for all such families. For instance, before transfers, more than half of children in migrant families in France and Sweden are in poverty; however, after transfers, these rates are more than halved in these nations for both migrant and native-born children. In contrast, in the United States (US) the antipoverty effect of social transfers for both native and migrant families is negligible, because net transfers overall are insignificant in comparison with other rich countries. Thus the differences in benefits across countries, for both migrants and natives, are greater than are the differences within countries for these same groups. If the United States is to do better in fighting child poverty and realizing the economic and social potential of all of its children, it needs to expand its efforts on behalf of both immigrant and native children.

Intergenerational Relationships and Union Stability in Fragile Families
Robin S. Högnäs and Marcia J. Carlson

Full Text: DP 1370-09

Using data from the Fragile Families and Child Wellbeing Study (N=2,648), we examine the association between intergenerational family relationships and the union stability of married and unmarried parents over 5 years after a baby’s birth. Our results show that more amiable relationships between fathers and the baby’s maternal grandparents are associated with a greater likelihood of marriage, and the focal child’s spending more time with their paternal grandparents is linked with cohabitation. Children’s greater contact with maternal grandparents is associated with diminished union stability, although this result is not robust to methods that better address selection. Our findings underscore the importance of considering broader social contexts for understanding contemporary patterns of union formation and dissolution among parents with children.

Education Levels and Mortgage Application Outcomes: Evidence of Financial Literacy
J. Michael Collins

Full Text: DP 1369-09

This paper uses 2005 Home Mortgage Disclosure Act data aggregated by census tract to measure the relationship between census tract-level college completion rates and the rates at which first lien refinance mortgage applicants submit incomplete loan applications, withdraw loan applications before they are reviewed, and reject lender approved loan offers. This paper also explores the relationship between tract-level college completion rates and the mean interest rate borrowers received for a subset of high-cost loans. The results indicate that first lien refinance loan applicants in tracts with higher rates of college completion are less likely to submit incomplete applications, to withdraw applications before they are reviewed by the lender, and to reject lender-approved loan offers. Tracts with higher rates of college completion pay lower mean interest rates as reported by lenders for high-cost loans. Consumers in census tracts with lower rates of college completion may engage in different search strategies for mortgage credit options than consumers in tracts with higher college completion rates. To the extent education is correlated with financial capability, these findings suggest loan applicants with lower educational attainment lack financial literacy concerning refinance mortgage application search strategies.

Contracting Welfare-to-Work Services: Use and Usefulness
Pierre Koning

Full Text: DP 1368-09

This paper contributes to the broad literature on public services contracting in two ways. First, we provide an empirical analysis of contracting decisions in the provision of welfare-to-work (WTW) services. We estimate both the WTW-contracting decisions of Dutch municipalities and their impact on the performance, measured as the fraction of Social Assistance (SA) recipients. Second, we explicitly model two forms of external provision of WTW services by municipalities: contracting with other municipalities and/or contracting out services to private providers. Our findings suggest that contracting decisions are predominantly driven by cost considerations, both for the decision to contract with other municipalities and the share of contracting out to private providers. Municipalities with low WTW budgets or facing budget constraints are more likely to contract with external parties–presumably this reduces their costs and as well as the risk of future cost deficits. We do not find contracting decisions to affect the performance of municipalities, measured as the use, inflow, or outflow out of the SA scheme. From this alone, however, we cannot conclude that the three provision modes are equally cost-effective too, as external provision may be less costly.

Experimental Estimates of the Barriers to Food Stamp Enrollment
Diane Whitmore Schanzenbach

Full Text: DP 1367-09

In the post-welfare reform era, Food Stamps have become an increasingly important aspect of the social safety net. Yet, take-up rates for Food Stamps are relatively low, especially among low-income working families, who may be more sensitive than non-workers to perceived stigma associated with Food Stamps. In particular, many potential recipients are under the impression that Food Stamp benefits are still paid – as the name of the program suggests – in special coupons that are stigmatizing to use at the grocery store. Today, though, benefits are paid via a card (EBT) that looks and feels much like a credit card, and can be swiped at the grocery store checkout line using the same card reading machine that is used for credit and debit card purchases. This paper describes the results of a randomized experiment conducted through H&R Block Tax Preparation offices in two California counties that offered to help potentially eligible clients in the Food Stamp Program. In some offices, the outreach program used language and brochures consistent with the standard Food Stamp outreach materials distributed by the USDA. In other offices, the outreach materials played up the lack of stigma in today’s program by describing the EBT card and the ease of its use. We find that individuals are much more likely to respond favorably to the outreach program if it highlights the lack of stigma. A second experiment offered a random subset of these respondents additional assistance in filling out the application form and filing it on their behalf directly with the county Food Stamp office. Respondents were more likely to successfully enroll in the program if they received more assistance in filing their application.

Does Debt Discourage Employment and Payment of Child Support? Evidence from a Natural Experiment
Maria Cancian, Carolyn Heinrich, and Yiyoon Chung

Full Text: DP 1366-09

Despite substantial technological improvements to the child support enforcement program, many single parents do not receive child support. Particularly for families whose incomes are below the poverty level, child support is frequently a vital financial resource. The federal government’s primary motivation for establishing the federal Child Support Enforcement (CSE) program was to recover the costs associated with public assistance payments to poor single-parent families by collecting payments from the noncustodial parents. In this study, we use variation in the birthing costs over time and across counties in Wisconsin to identify the effect of child support debt on nonresident fathers’ child support payments and formal earnings. Our results suggest that higher arrears, in themselves, substantially reduce both child support payments and formal earnings for the fathers and families that already likely struggle in securing steady employment and coping with economic disadvantage, a serious unintended consequence of child support policy.

Stepping Stone or Dead End? The Effect of the EITC on Earnings Growth
Molly Dahl, Thomas DeLeire, and Jonathan Schwabish

Full Text: DP 1365-09

While many studies have found that the EITC increases the employment rates of single mothers, no study to date has examined whether the jobs taken by single mothers as a result of the EITC incentives are "dead-end" jobs or jobs that have the potential for earnings growth. Using a panel of administrative earnings data linked to nationally representative survey data, we find no evidence that the EITC expansions between 1994 and 1996 induced single mothers to take "dead-end" jobs. If anything, the increase in earnings growth during the mid-to-late 1990s for single mothers who were particularly affected by the EITC expansion was higher than it was for other similar women. The EITC encourages work among single mothers, and that work continues to pay off through future increases in earnings.

Changing Poverty and Changing Antipoverty Policies
Maria Cancian and Sheldon Danziger

(Also published as introduction to conference volume, Changing Poverty, Changing Policies)
Full Text: DP 1364-09

Since the early 1970s, dramatic changes in the economy, demographic composition of the population, and in public policies have combined to reduce the antipoverty effects of economic growth. Because economic growth is now necessary, but not sufficient, to significantly reduce poverty, antipoverty policies must be expanded and reformed, especially in the aftermath of the severe recession that began in late 2007.

The authors review three cross-cutting factors that shape the extent and nature of poverty and prospects for reducing poverty: the changing role of race and ethnicity in the labor market and society; changing gender roles that influence both trends in labor force participation of women and patterns of family formation and childbearing; and the recent history of social welfare programs and policies. They conclude by recommending a set of high priority antipoverty policies that are consistent with current trends in work effort, patterns of family formation, and continuing changes in how the globalized economy affects the employment and earnings prospects of less-educated workers. These policies focus on making work pay, helping parents balance work and family responsibilities, and raising the educational attainment of disadvantaged children. The authors also briefly summarize the other chapters in the forthcoming Changing Poverty volume.

Long-Term Effects of Public Low-Income Housing Vouchers on Labor Market Outcomes
Deven Carlson, Robert Haveman, Tom Kaplan, and Barbara Wolfe

Full Text: DP 1363-09

The federal Housing Choice Voucher (Section 8) Program provides eligible low-income families with an income-conditioned voucher that pays for a portion of rental costs in privately owned, affordable housing units. This paper extends prior research on the effectiveness of rental support programs in several ways. The analysis employs a unique longitudinal dataset created by combining administrative records maintained by the State of Wisconsin with census block group data. We use a propensity score matching approach coupled with difference-in-differences regression analysis to estimate the effect of housing voucher receipt on the employment and earnings of voucher recipients; we track these effects for five years following voucher receipt. Our results indicate that voucher receipt has a generally positive effect on employment, but a negative impact on earnings. The negative earnings effect is largest in the years following initial receipt of the rental voucher, and dissipates over time. We find that the pattern of recipient labor market responses to voucher receipt differs substantially among demographic subgroups. In addition to our overall results, we present sensitivity results involving alternative estimation methods, as well as distinctions between those who receive transitory voucher support and those who are long-term recipients.

From Policy to Polity: Democracy, Paternalism, and the Incorporation of Disadvantaged Citizens
Sarah K. Bruch, Myra Marx Ferree, and Joe Soss

Full Text: DP 1362-09

This article investigates how experiences with public policies affect levels of civic and political engagement among the poor. Previous studies suggest that direct encounters with welfare institutions can produce "feedback effects" on political attitudes and behaviors that vary by policy design. To advance this literature, we take up three outstanding questions related to problems of selection bias, the distinction between universal and targeted programs, and the types of authority relations most likely to foster engagement among the poor. Taking advantage of a dataset with unique benefits for the study of feedback effects among low-income populations, we estimate effects associated with three types of means-tested public assistance. We find that the feedback effects of these policies are not an illusion created by selection bias; the feedback effects of targeted programs can be positive as well as negative; and such effects tend to be more positive when a policy's authority structure reflects democratic rather than paternalist principles.

The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit
Gordon Dahl and Lance Lochner

Full Text: DP 1361-09

Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use two simulated instrumental variables strategies to estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100. Using a panel of almost 5,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. The gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications. We find little evidence of long-run income effects, with most of the effects disappearing after one year.