Determinants of AFDC Caseload Growth. 5. AFDC Program Variables


Program Parameters

The findings for two of the three program parameters included in the specification are very similar to those found for the Basic program, but the findings for the third are a puzzle. We estimate that a one percent increase in maximum monthly benefits increases the caseload by 0.26 percent after two quarters, compared to 0.27 percent for the Basic caseload, and that an increase in the earnings cut-off relative to the gross income limit of 10 percentage points reduces the caseload by 0.9 percent, compared to 1.0 percent for the Basic caseload. The puzzling finding is that the current quarter coefficient for the average tax and benefit reduction rate has the wrong sign and is substantial, although insignificant. Perhaps more importantly, the sum of the coefficients on the current and two lagged values of the variable is essentially zero, compared to -0.15 in the Basic caseload model. Findings for the other participation measures are quite similar to those in the Basic caseload model.

Federal Legislation

The sum of the coefficients on the current and lagged OBRA81 dummy implies a 10 percent reduction in the caseload after one quarter in addition to any reductions due to changes in program parameters, compared to a reduction of seven percent for the Basic caseload. Hence, the point estimates for the two caseloads are very similar, even though the finding for the UP caseload is not statistically significant. The DEFRA84 coefficient is essentially zero, indicating that any effect of DEFRA84 on the caseload is captured by the program parameters and the year dummies. This finding also accords well with the finding for the Basic program.

1115 Waivers

We did not find any statistically significant coefficients for the 1115 waiver dummies in the UP equations.