Welfare Transitions in the 1990s: The Economy, Welfare Policy, and the EITC

Jeffrey Grogger

NBER Working Paper No. 9472
Issued in February 2003
NBER Program(s):   LS   PE

The rapid decline in the welfare caseload remains a subject of keen interest to both policymakers and researchers. In this paper, I use data from the Survey of Income and Program Participation spanning the period from 1986 to 1999 to analyze how the economy, welfare reform, the Earned Income Tax Credit, and other factors influenced welfare entries and exits, which in turn affect the caseload. I find that the decline in the welfare caseload resulted from both increases in exits and decreases in entries. Entries were most significantly affected by the economy, the decline in the real value of welfare benefits, and the expansion of the EITC. The EITC had substantial effects on initial entries onto welfare. Exits were most significantly affected by the economy and federal welfare reform. Federal reform had its greatest effects on longer-term spells of the type generally experienced by more disadvantaged recipients. Some out-of-sample predictions help explain the otherwise puzzling observation that, despite substantial increases in the unemployment rate since 2000, caseloads have remained roughly constant.

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Document Object Identifier (DOI): 10.3386/w9472


  • Grogger, Jeffrey. "The Effects Of Time Limits, The EITC, And Other Policy Changes On Welfare Use, Work, And Income Among Female-headed Families," Review of Economics and Statistics, 2003, v85(2,May), 394-408.
  • Jeffrey Grogger, 2004. "Welfare transitions in the 1990s: The economy, welfare policy, and the EITC," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 671-695. citation courtesy of

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