What Causes Public Assistance Caseloads to Grow?

Abstract

This paper uses state panel data to investigate changes in public assistance caseloads through the end of the AFDC program in 1996, with particular attention to the rapid increase in caseloads between 1990 and 1994. Previous research has focused on total caseloads, with attention to economic and policy variables, and does a relatively poor job of explaining this caseload increase. This paper utilizes a much richer set of control variables to investigate the causes of caseload change; it separates AFDC caseloads into three subcomponent programs, separately investigating changes within the AFDC-UP program, AFDC child-only cases, and the remaining AFDC cases (with benefits paid to single mothers and their children); and it explores whether this caseload rise was driven by changes in takeup rates versus in eligibility. The results indicate a large unexplained rise in total AFDC caseloads, even with a very rich specification. A good share of this is due to sharp increases in child-only cases, driven by program and demographic shifts. To a lesser extent, this rise was caused by the expansion of AFDC-UP to all states. These two factors explain half of the overall rise, and all of the unexplained rise in AFDC caseloads. The remaining increase in AFDC cases-benefits received by single mothers and their children-is well explained within the model, and is the result of economic, demographic, political and policy changes. These variables appear to have increased eligibility among the core AFDC population in the early 1990s during the economic slowdown. Takeup rates also increased during this time period, but not by a large amount.