General Equilibrium Labor Market Effects of Welfare Reform

Kosali I. Simon, Cornell University
Ning Zhang, Cornell University

Researchers find that employment of single mothers increased after implementation of welfare reform in 1996. However, little research considers how this may affect otherwise similar workers who were present in the labor force before reform. We plan to analyze the general equilibrium effect of PRWORA by comparing the labor market outcomes of several groups who are substitutes (to different degrees) for former welfare recipients, including low-skilled married mothers, childless females and low-skilled males before and after welfare reform. We will control for the state of the economy, and relevant economic policies other than welfare reform which also affect these labor markets. The main dataset used is the merged outgoing rotation groups from the Current Population Surveys 1990-2003, which allows us to look at how different groups fared during the two recent recessions (1992 and 2001) as well as the period after the welfare reform.