The incentive effects of cash transfers to the poor

Abstract: All large redistributive and social insurance programs trade-off potential benefits of transfers with the disincentives they generate through eligibility rules, which typically lower incentives to marry, work or move. These behavioral changes increase the cost of the program and can undermine its objectives, for instance they could ultimately harm children. We investigate the extent of these disincentives over the recipients' lifetime using newly collected administrative data for more than 13,000 women from the Mother's Pension Program, the first welfare program in the US. We find that welfare receipt does not affect lifetime remarriage rates but delays marriage by a year. Although theory predicts delays should be associated with improvements in the quality of the match, women married better men only in states were welfare laws were liberal and thus where the stigma of welfare was low. We find no changes in the lifetime fertility and work behavior of the mother, but we do find that recipients were less likely to move away from their county of residence. Overall the long term benefits of welfare appear to accrue to children (rather than mothers) and they do not seem to be mediated by changes in the marriage and labor market outcomes of mothers.

Presenter: Adriana Lleras-Muney (UCLA)​

Co-authors: Anna Aizer and Shari Eli​

Location: Washington D.C. - Conf. Room SE-1035 (10th floor)