Association for Public Policy Analysis & Management

We estimate the effect of welfare reform on the intergenerational transmission of AFDC/TANF participation using a long panel of mother-daughter pairs over the survey period 1968-2013 in the Panel Study of Income Dynamics. Because states implemented welfare reform at different times starting in 1992, the cross-state over time variation permits us to quasi-experimentally separate out the effect of mothers’ participation on daughters’ welfare choice in the pre- and post-welfare reform periods. In addition, our empirical framework addresses potential biases in estimating a causal pathway from parent to child from endogenous selection into welfare, life-cycle factors, and misclassification error. Our estimates show that there is a causal transmission of AFDC/TANF participation from mother to daughter, but that welfare reform significantly attenuated this transmission by at least 50 percent. The causal pathway is stronger among black families than whites, with selection accounting for more of the transmission across generations among whites. The estimates are robust across a variety of specifications, including the length of mother-daughter observation window, the age of welfare exposure by the daughter when living at home, life-cycle age adjustments, and misclassification error. However, when we broaden the definition of welfare received by the daughter to also include assistance from food stamps or disability (Supplemental Security Income) then the transmission from mother to daughter does not substantively change after welfare reform. This seems to be a consequence of persistence in intergenerational poverty status.