Determinants of AFDC Caseload Growth. A. INTRODUCTION

07/01/1997

In this chapter we present sample period caseload and average monthly benefit (AMB) simulations produced by the model, and compare simulated to actual growth. The purpose of the exercise is to provide insights into the size and relative importance of various causes of change in the past. In Section B we present simulations for national caseload and AMB series, and in Section C we present simulations for four selected states: California, Florida, Maryland, and Wisconsin. Concluding comments appear in Section D.

We decompose average annual caseload and AMB growth during selected sample subperiods and the full sample period into growth accounted for by the model and growth not accounted for. Accounted for growth is further decomposed into growth accounted for by five sets of factors: population growth and aging; vital statistics; labor market variables; AFDC program variables; and the miscellaneous other variables included in each model.(1) With one exception, we present separate simulations for the Basic and UP programs; the exception is for Florida, which did not have an UP program for the full sample period.

We do not include the year dummies in the simulated series. If we included them, the simulated series would track the actual series quite closely. We exclude them from the simulations to demonstrate the extent to which variation in the actual series reflects variation in the state-level variables we have included in the model. The year dummies capture national factors, such as changes in federal programs that apply equally to all states (e.g., many aspects of AFDC-related legislation), and the average effects of state-level variables that have not been captured in the model.

The models used in the simulations are the caseload models reported in Exhibits 5.1 and 5.3. The national UP caseload simulations are for the 19 states with UP programs for the full sample period. We also present graphs showing the relationship between actual and predicted caseload growth during the sample period. These show the timing and magnitude of significant departures between the actual and predicted series, and may provide clues about the causes of such departures.

We divide the sample period into four subperiods, corresponding roughly to periods of national economic recession and expansion: the first four years from 1979.4 to 1983.3 include the "double-dip" recession of 1980 and 1981-82; the next period, the six years from 1983.4 through 1989.3, is one of sustained economic growth; the third period, the four years from 1989.4 to 1993.3, encompasses the recession of 1990-91; and the final year, from 1993.4 to 1994.4, is one of substantial expansion.(2) The first subperiod also includes the implementation of OBRA81, while the second includes the implementation of DEFRA84, and the third includes the implementation of FSA88.