Determinants of AFDC Caseload Growth. 5. AFDC Program Variables


Program Parameters

The variable with the most significant coefficient in the model is, not surprisingly, the current value of the maximum monthly benefit. The current coefficient is a highly significant 0.66, and the coefficients on the first and second lag are both negative, but not significant. The finding suggests that a one percent increase in MMB is immediately translated into an almost equal increase in the average benefits received by existing cases, but that the average benefit might fall as new families enter the caseload and receive lower than average benefits.

The estimated effects of a change in the average tax and benefit reduction rate (ATBRR) are somewhat puzzling and reminiscent of the puzzling findings for UP participation. The pattern of the coefficients would be consistent with the hypothesis that existing AFDC families initially lose benefits, but over time they either recover benefits by reducing other income or marginal families with low benefits leave the caseload -- but this conclusion may be too strong. After two quarters, any initial effects of a change in the ATBRR disappear.

A similar pattern appears in the coefficients of the current and lagged values of the AFDC earnings cut-off (ECO) relative to the gross income limit (GIL). They suggest that a reduction in the GIL, holding ECO constant (i.e., an increase in the ratio) initially reduces AMB, but after two quarters this negative effect is more than offset as, perhaps, some females reduce their other income, thereby increasing benefits, and marginal families with below average benefits leave the roles.

Federal Legislation

The estimated effects of OBRA81 on AMB depend on the coefficients on the OBRA81 variable, the 1981 and 1982 year dummies, and the program parameter coefficients, along with the magnitude of the changes in the parameters that resulted from OBRA81. The estimated impact of DEFRA84 is similarly complex. We discuss their effects in the context of the AMB simulations (Chapter 6).

The effect of the UP programs established in 1990.4 under the mandate of FSA88 depends on both the dummy for mandated programs and the dummies for six-month and twelve-month programs. About half of the 23 states affected introduced six-month programs. The combined coefficients for the 1990.4 dummy and the six-month dummy indicate these states experienced, if anything a small reduction in AMB as a result. The estimates suggest that states which introduced 12-month UP programs in 1990.4 experienced a reduction in AMB as a result, by 2.5 percent (based on the sum of the coefficients for the 1990.4 dummy and the 12-month dummy). This may be because UP families in six-month programs are only in the program in the months when their income from other sources is lowest.

1115 Waivers

The only waiver dummy that appears in the final AMB specification is the dummy for the family cap, and it has a significant coefficient that suggests that this type of restriction increases AMB by 5.5 percent. This is puzzling because we would expect such restrictions to, if anything, reduce benefits for families that would have been AFDC families anyway. It may be that the restrictions discourage small families, with below average benefits, from participating in AFDC, but it seems unlikely that the effect of such a change in the composition of the caseload would be so large. As with the finding in the Basic participation models, there are more likely explanations of this finding: other efforts to reduce caseloads in the three states that imposed family caps; migration of some AFDC families to other states; and chance.