Child support, welfare dependency, and women's labor supply

This study evaluates the potential effectiveness of alternative child suppo rt policies in reducing welfare program participation. Employing longitudin al data from the Panel Study of Income Dynamics, the analysis addresses the simultaneity of women's decisions regarding welfare participation, labor f orce participation, and annual hours of work following marital breakup. The estimation framework accounts for the endogeneity of child support payment s with female labor supply and for the selection bias due to differential r ates of remarriage among divorced/separated women. Results show that higher child support payments would (i) decrease welfare participation and (ii) i ncrease average hours of work. The empirical estimates are used to assess t he potential effects of adopting alternative child support policies such as the Wisconsin child support assurance system. These results suggest that l arge potential welfare cost savings are attainable but significant reductio ns in welfare participation rates would only be achieved through substantia l improvements in child support enforcement or through government-assured c hild support payments.