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Abstract

Previous studies have examined whether the welfare system has contributed to the dramatic increase in single-parent families. This paper explores why the results in this literature are sensitive to the presence of state fixed effects. It considers one natural explanation, namely that the composition of the population differs across states in ways that are related to welfare program generosity. After controlling for individual effects the results provide no evidence that welfare raises the propensity to form female-headed households for either whites or blacks. These results illustrate the potential pitfalls of assuming that state factors are fixed over a long period of time. They also suggest that previous studies may have overstated the effect of welfare programs on family structure.

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