Debt, Asset Accumulation, and Livelihoods among TANF Participants

Marlene A. Lee, University of Wisconsin at Madison

A family’s ability to maintain a certain level of consumption depends on its total resource base, including a constellation of financial and non-financial resources. Thus, household wealth is central to family economic well-being and a critical determinant of life chances. This paper examines one factor that contributes to household net worth--debt--and attempts to determine the role debt plays in welfare recipients’ household resource management. Using the economic life cycle model as a framework and tobit models with decomposition, I assess the fit of the life cycle model as applied to welfare recipients' households and whether the inclusion or exclusion of attitudes and livelihood variables improves the fit for this population. Results suggest that higher levels of debt in this population are associated with greater access to credit and asset accumulation.