Sage Journals: Discover world-class research

Abstract

This article uses vector autoregression techniques with a panel data set to test for interdependencies between spending on the Aid to Families With Dependent Children AFDC) program and expenditures on three other major public assistance programs: Medicaid, food stamps, and Supplemental Security Income. Tests of Granger causality reveal that there are spillover effects in both directions among these programs, suggesting that substantial feedback effects are likely. The author uses the estimated model to simulate the effects of one-time spending decreases on either side. The simulation, which includes both direct and indirect effects, shows that these spending cuts result in long-term decreases in expenditures on the affected program. However, changes in AFDC spending are likely to be at least partially offset by changes in one or more of the other programs. Similarly, budget cuts in the other programs can result in increased AFDC spending. This suggests that the new welfare law may not produce the budgetary savings expected by its sponsors.

Get full access to this article

View all access options for this article.

References

Blank, Rebecca M. 1997a. It takes a nation: A new agenda for fighting poverty. Princeton, NJ: Princeton University Press.

Blank, Rebecca M. 1997b. What causes public assistance caseloads to grow? Unpublished paper, Northwestern University.

Chamberlain, Gary . 1983. Paneldata. In The handbook of econometrics, vol.2, edited by Z. Griliches and M. Intrilligator , ch. 22. Amsterdam: North-Holland.

Chernick, Howard . 1998. Fiscal effects of block grants for the needy: An interpretation of the evidence. International Tax and Public Finance 5:205-233.

Craig, Steven G. , and Robert P. Inman . 1986. Education, welfare and the “new” federalism: State budgeting in a federalist public economy. In Studies in state and local public finance, edited by Harvey S. Rosen , 187-226. Chicago: University of Chicago Press.

Danziger, Sheldon , and Peter Gottschalk . 1995. America unequal. Cambridge, MA: Harvard University Press.

DeParle, Jason . 1997. Success, and frustration, as welfare rules change. The New York Times,30 December, 1.

Gordon, Linda . 1994. Pitied but not entitled: Single mothers and the history of welfare, 1890- 1935. New York: Free Press.

Greene, William H. 1993. Econometric analysis. 2d ed. New York: Macmillan.

10.

Hamilton, James D. 1994. Time series analysis. Princeton, NJ: Princeton University Press.

11.

Holtz-Eakin, Douglas , Whitney Newey , and Harvey S. Rosen . 1988. Estimating vector autoregressions with panel data. Econometrica 56:1371-1395.

12.

McCarty, Therese A. , and Stephen J. Schmidt . 1997. A vector autoregression analysis of state government expenditure. American Economic Review 87:278-282.

13.

Mincy, Ronald B. 1994. The underclass: Concept, controversy, and evidence. In Confronting poverty: Prescriptions for change, edited S. H. Danziger , G. D. Sandefur , and D. H. Weinberg , 109-146. Cambridge, MA: Harvard University Press.

14.

Moffitt, Robert . 1990. Has state redistribution policy grown more conservative? National Tax Journal 43:123-142.

15.

Murray, Charles . 1984. Losing ground: American social policy, 1950-1980. New York: Basic Books.

16.

Pindyck, Robert S. , and Daniel L. Rubinfeld . 1991. Econometric models and economic forecasts. 3d ed. New York: McGraw-Hill.

17.

U.S. Council of Economic Advisers . 1997. Explaining the decline in welfare receipt, 1993-1996. Available at http://www.whitehouse.gov/WH/EOP/CEA/

18.

U.S. Department of Commerce, Bureau of Economic Analysis . 1995. Regional Economic Information System (REIS). CD-ROM database. Washington, DC: Bureau of Economic Analysis.

19.

U.S. Department of Health and Human Services , Health Care Financing Administration , Bureau of Data Management and Strategy . Various years. Quarterly statement of Medicaid expenditures for the medical assistance program. Form HCFA-64.

20.

U.S. House of Representatives . 1996. Background material and data on programs within the jurisdiction of the Committee on Ways and Means, ‘The 1996 Green Book.’ Washington, DC: Government Printing Office. Available at http://www.house.gov/ways_means/publica.htm

21.

Ziliak, James P. , David N. Figlio , Elizabeth E. Davis , and Laura S. Connolly . 1997. Accounting for the decline in AFDC caseloads: Welfare reform or economic growth? Discussion paper no. 1151-97. Institute for Research on Poverty, University of Wisconsin.

Interrelationships among Public Assistance Expenditures: An Empirical Analysis of the Welfare System

Abstract

Get full access to this article

References