Welfare and work among mothers of preschoolers.

This paper reports findings from an exploration of the effects of both AFDC and AFDC child care disregards upon womens labor supply controlling for local labor market conditions. The analysis uses a time series of cross-sections from the June Population Survey to examine how changes in public policy over time and across states relate to mothers labor supply. State fixed effects are controlled. No previous paper has used individual-level data to estimate the response of work to monthly payment levels while controlling for the endogeneity of welfare benefit levels. This work also extends previous analyses by explicitly controlling for market wage opportunities for both men and women and for welfare program policies which are designed to counteract the work-discouraging effects of AFDC. Previous literature relating to welfare and work is summarized and hypotheses outlined. Data are from 1979-88. The researchers analysis produced empirical support for the theoretical prediction of an employment-discouraging effect of the AFDC program. Both lower guarantee levels and added child care disregards would promote employment among unmarried mothers.