Volume 21, Number 4 (Fall) 1986
Wolf, Douglas, and David Greenberg. 1986. "The Dynamics of Welfare Fraud: An Econometric Duration Model in Discrete Time." Journal of Human Resources 21(4): 437-455.
An important source of errors in transfer payments programs is the fraudulent misreporting of earnings received by recipients. We propose a model of the recipient's decision to report income and the expected penalties if caught engaging in fraud. We discuss several features of the detection and penalty structures in the AFDC and Food Stamps programs and present estimates of a model of the duration of fraudulent earnings-misreporting episodes. We find that recipients respond to increases in the returns to fraud by lengthening their episodes of misreporting. However, the level of fraudulent activity at any given time is rather low.
Wolf is a research scholar at the International Institute for Applied Systems Analysis and a senior research associate (on leave) at the Urban Institute,. Greenberg is a professor of economics at the University of Maryland. A preliminary version of this paper was presented at the Sixth Annual Research Conference of the Association for Public Policy Analysis and Management, October 1984. This research was funded in part by Grant Number 59-3198-142 from the Food and Nutrition Service, U.S. Department of Agriculture, to SRI International. The authors acknowledge useful comments from Kathy Swartz and are grateful for the expert assistance of Terri Murray and Susanne Stock. The opinions expressed in this paper are those of the authors and do not necessarily represent the views of the International Institute for Applied Systems Analysis, The Urban Institute, the University of Maryland, SRI International, or their sponsors.
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