Mazzolari, Francesca. 2007. “Welfare Use when Approaching the Time Limit.” Journal of Human Resources 42(3): 596–618.
Time limits reduce caseloads directly by cutting off benefits after a time-limited usage, but may also provide families with an incentive to reduce welfare use in order to conserve their benefits. Both effects depend on the stock of remaining months of eligibility. This is the first empirical study to incorporate information on this crucial determinant of takeup and eligibility under time limits. Accounting for the potential endogeneity of an individual’s past use, time limits are estimated to have decreased welfare use by 25 percent between 1996 and 2003. Roughly one-fifth of this reduction is due to behavioral responses.
Francesca Mazzolari is an assistant professor of economics at the University of California, Irvine. The author thanks Julie Berry Cullen for many helpful discussions and valuable suggestions on previous versions of this paper. She also thanks Kate Antonovics, Eli Berman, Hoyt Bleakley, Nora Gordon, Roger Gordon, Gordon Hanson, Michele Pellizzari, Giuseppe Ragusa, many seminar participants and two anonymous referees for helpful comments. The data used in this article can be obtained beginning January 2008 through December 2010 from Francesca Mazzolari, Department of Economics, UCI, Irvine, CA 92697-5100, <fmazzola@uci.edu>.