Welfare benefits and birth decisions of never-married women

Abstract

For some time now, the out-of-wedlock birthrate has been increasing rapidly in the United States. This has prompted several states to propose (and in some cases, enact) legislation to deny access to higher AFDC benefits for families in which the mother gives birth while receiving AFDC. The authors investigate whether AFDC benefit levels are systematically related to the family-size decisions of never-married women. Using a bivariate probit model with state and time fixed effects, applied to Current Population Survey data for the years 1980–1988, it is found that the basic benefit level for a family of two (one adult and one child) and the incremental benefit for a second child positively affects the family size decisions of black and Hispanic women, but not of white women. The effects are concentrated among high school dropouts (no effects are found for high school graduates). The authors conclude that rather than to uniformly deny benefits to all AFDC women that bear children, a better targeted policy might be to alter the AFDC benefit structure in such a way as to encourage single mothers to complete high school. However, being a high school dropout might be a proxy for some other underlying characteristic of the woman, and encouraging women to complete high school who otherwise would not might have no effect whatsoever on nonmarital births.