The intergenerational effects of welfare participation (Job Talk)

Abstract: This paper estimates the intergenerational effects of welfare participation by studying the implications of an Israeli welfare reform that increased welfare benefits generosity and eased eligibility requirements for single mothers during the 1990s. Using a difference-in-difference framework, I compare the outcomes of children of single mothers relative to children of married mothers before and after the reform took place. I show that the reform led to higher welfare participation rates and a decline in labor supply among single mothers and that these changes had spillover effects on their children's long-term economic outcomes. Children's future welfare participation rates significantly increased following the reform, but so did their labor force participation rates and earnings, implying an increase in parental investments as a result of higher disposable income. Moreover, I find that while welfare use increased at the bottom of the earnings distribution, and only during early adulthood, children long-term employment rates and labor earnings increased significantly and persistently across the entire earnings distribution.

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