Determinants of AFDC Caseload Growth. 3. Demographic Variables

07/01/1997

Population Growth and Aging

 

The expected participation variables allow us to capture the effects of both growth and aging of the at-risk population in a single variable. They do not, however, appear explicitly as explanatory variables in Exhibit 5.1. They are included, but their coefficients are fixed. As discussed in Chapter Three, we hypothesized that the true coefficients of the expected participation variables are each one (a one percent increase in expected participation due to population growth and aging leads to a one percent increase in actual participation). The expected participation variable was, by far, the most significant variable in the initial specifications. The coefficients were always less than one, but not often significantly less than one. Hence, we imposed the restriction that the coefficient is one. This is equivalent to using the logarithm of actual relative to expected participation as the dependent variable, as we report at the top of the exhibit.

Vital Statistics

Of the three vital statistics variables, out-of-wedlock births, marriages, and divorces, only the first two were significant in most specifications tried, for at least some lags. Coefficients of the divorce variable generally had the wrong sign and were, at best, marginally significant. We suspect that reported divorces are a poor predictor of participation because AFDC participation may begin in anticipation of divorce in many cases. Hence, we dropped the divorce variable from the final specification.(2)

The coefficients of the vital statistics variables are quite significant. Both a one percent increase in out-of-wedlock births and a one percent reduction in marriage are associated with a 0.1 percent increase in participation.(3)

Immigration

Two immigration variables were tried, the number of immigrants legalized under IRCA-86, and the number of other legal immigrants -- both as immigrants per capita, and both in level, rather than change, form.(4) The former variable consistently had a statistically significant coefficient, and the latter never did. Waiting periods on AFDC participation for IRCA immigrants (five years) and others (three years) during this period make it unlikely that the immigrants themselves would become participants as soon as one year after immigration.

One possible reason for the significant coefficient on the IRCA variable is the "child-only" phenomenon that has been observed in California and other states with large numbers of IRCA immigrants. Many parents legalized under IRCA had children who were citizens because they had been born in the United States. These children were eligible for benefits prior to their parents' legalization, but parents evidently feared deportation should they apply. Once the parents became legal immigrants, many applied for benefits for their children. The estimates imply that each legalization per 100 population resulted in a 5.0 percent increase in the caseload. The coefficient in the child recipient equation is smaller, 3.6 percent, suggesting that the number of child recipients in these families is smaller than for the mean AFDC Basic family. The coefficient in the total recipient equation is smaller still, 2.3 percent, consistent with the "child-only" explanation.