Association for Public Policy Analysis & Management

High school dropout and youth idleness (i.e., youths neither working nor in school) are large problems in the United States, particularly in poor communities, where 30 percent do not complete high school and nearly 10 percent are idle.  While conditional cash transfers (CCT) have been used to shape behaviors of poor youths in many other countries (e.g., Progresa, Bolsa Familia, etc.), using household-based transfers to affect youth behaviors, such as dropout, idleness, and employment, has been little studied in the United States.

 In this paper I investigate a previously unexamined dimension of post-1996 United States welfare policy that operated much like a CCT: In particular, I study the impact of state-level welfare program rules that conditioned receipt of household welfare benefits on work participation of any teen household member who was not enrolled in school.  To investigate whether these policies affected rates of youth idleness, school enrollment, or employment, I exploit variation in these state-level welfare policies across states and over time. 

 For my primary data analysis, I combine repeated cross-sections of the Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) for the years 1998-2006.  I estimate Difference-in-Difference (DD) and Difference-in-Difference-in-Difference (DDD) models to investigate the impact of these state-level welfare program rules on youth outcomes, including school enrollment, work, and idleness. 

I find that conditioning household welfare benefits on youth behavior in this way reduced youth idleness by approximately 3 percentage points (20%) and that it increased youth employment by approximately 4 percentage points (21%).  I find some suggestive evidence that these welfare rules also increased school enrollment by around 3 percentage points (5%), mostly through increases in full-time (as opposed to part-time) enrollment.  These results suggest some promise in using household-based financial incentives, particularly those structured in the form of conditional cash transfers, as a means to shift youth away from idleness and into human-capital enhancing activities.