CFDP 2121R

Marriage, Labor Supply and the Dynamics of the Social Safety Net


Publication Date: February 2018

Revision Date: November 2020

Pages: 83


The 1996 US welfare reform introduced limits on years of welfare receipt. We show that this reduced program participation, raised employment for single mothers, and reduced divorce. A limited commitment, lifecycle model of labor supply, marriage and divorce, estimated on pre-reform data, replicates these effects. A large part of the responses occur in anticipation of benefit exhaustion, impacting primarily women with low potential earnings. The reform reduces lifetime utility of women, even allowing for the government savings, but has negligible effects on men. The expectation of marriage attenuates the losses for women and an increased probability of single-motherhood raises them.

Keywords: Welfare reform, Life-cycle, Marriage and divorce, Time limits, Limited commitment, Intrahousehold allocations

JEL Classification Codes: D91, H53, J12, J21

JEL Classification Codes: D91H53J12J21