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Marriage, Labor Supply and the Dynamics of the Social Safety Net

The 1996 US welfare reform introduced time limits on welfare receipt. We use quasi-experimental evidence and a lifecycle model of marriage, divorce, program participation, labor supply and savings to understand the impact of time limits on behavior and well-being. Time limits cause women to defer claiming in anticipation of future needs, an effect that depends on the probabilities of marriage and divorce. Time limits cost women 0.5% of lifetime consumption, net of revenue savings redistributed by reduced taxation, with some groups affected much more. Expectations over future marital status are important determinants of the value of the social safety net.

wp2039.pdf (1.35 MB)
Hamish Low
Costas Meghir
Luigi Pistaferri
Alessandra Voena
Publication Date
December, 2022