Abstract

Economic and welfare program factors affect the well-being of low-income families and their labor supply decisions. This study uses data from the U.S. Survey of Income and Program Participation. A nested logit model is estimated to explain the joint decisions to participate in Temporary Assistance for Needy Families (TANF) and the labor market for the population of families potentially eligible for TANF. The empirical findings indicate that higher wages increase labor and decrease welfare program participation; an increase in nonlabor income decreases both labor market and welfare participation.

Keywords: labor supply, low income, welfare program, welfare reform.