Hurst, Erik, and James P. Ziliak. 2006. “Do Welfare Asset Limits Affect Household Saving? Evidence from Welfare Reform.” Journal of Human Resources 41(1): 46–71.
We use data from the Panel Study of Income Dynamics to estimate the effect of new saving incentives implemented as part of the 1996 welfare reform on household saving. Economic theory predicts that loosening asset limits will increase total savings for households with a large ex-ante probability of welfare receipt such as female-headed households with children. We follow a sample of female heads with children and find that in both absolute terms, and relative to comparison groups of male heads and female heads without children, there has been no effect of welfare policy changes on the saving of at-risk households.
Erik Hurst is an associate professor of economics in the Graduate School of Business at the University of Chicago; James P. Ziliak is the Carol Martin Gatton Endowed Chair in Microeconomics and Director of the U.K. Center for Poverty Research at the University of Kentucky. The authors thank Mark Aguiar, Orazio Attanasio, Steve Davis, Gary Engelhardt, Austan Goolsbee, Craig Gundersen, Shif Gurmu, Alana Landy, Annamaria Lusardi, Robert Moffitt, Don Oellerich, Melinda Pitts, Lucie Schmidt, Karl Scholz, Mark Schreiner, Tim Smeeding, Nick Souleles, Geoffrey Wallace, Aaron Yelowitz, Steve Ziliak, three anonymous referees, and seminar participants at the 2002 American Economic Association Meetings, Georgia State University, Georgia Tech University, the 2001 Institute for Research on Poverty Summer Workshop, Syracuse University, the University of Chicago, and the University of Wisconsin for helpful comments on an earlier version of this paper that circulated under the title “Welfare Reform and Household Saving.” This project was supported under grant number 00ASPEE355A from the Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services. The opinions and conclusions expressed herein are solely those of the authors and should not be construed as representing the opinions or policy of any agency of the Federal Government. The data used in this article can be obtained beginning August 2006 through July 2009 from James P. Ziliak at Department of Economics, Gatton College of Business & Economics, University of Kentucky, Lexington, KY 40506–0034. E-mail: jziliak@uky.edu.