Journal of Human Resources

Is There an Effect of Incremental Welfare Benefits on Fertility Behavior? A Look at the Family Cap

Abstract

This analysis exploits the variation across states in the timing of policy implementation to determine if family cap policies lead to a reduction in births to women ages 15 to 34. Vital statistics birth data for the years 1989 to 1998 offer no such evidence. The data reject a decline in births of more than one percent. The finding is robust to multiple specification checks. The data also reject large declines in higher-order births among demographic groups with high welfare participation rates.

Introduction

Over the past decade, states across the country have been experimenting with welfare reform. One of the most controversial reform policies, the "family cap" or "child exclusion," is motivated by the notion that an incremental increase in cash assistance for each additional child increases a woman's propensity to bear additional children. With the intention of heightening personal responsibility, 18 states have responded to this concern by implementing family caps that end the traditional practice of providing families on welfare with additional cash benefits when a new child is born into the family. An additional five states have altered the form of the additional benefit, but not eliminated it entirely. This paper uses the variation across states in the timing of family cap implementation to identify whether the denial of incremental benefits leads to a reduction in births.

A woman's decision to give birth is part of a complex series of decisions influenced by social, religious, economic, and other demographic and personal factors. The question of how welfare benefits affect this decision focuses on the role of economic factors in determining this choice. The primary economic question is whether the availability of fewer resources at the margin decreases a woman's propensity to bear additional children. The potential direct effect of the policy is to reduce higher-order births: a decrease in marginal resources raises the price of an additional child and may thereby deter a woman from having additional births. Insofar as the policy sends a message that welfare is less generous than previously, it may also lead a woman to delay childbearing until she is financially secure and thereby reduce first births as well.