Social Approval, Values, and AFDC: A Re-Examination of the Illegitimacy Debate

Abstract

Empirical attempts to link teenage out-of-wedlock births to the incentive structure of Aid to Families with Dependent Children (AFDC) have met with mixed results. This has suggested to many researchers that, while the AFDC program contains incentives for poor women to have children out-ofwedlock, these incentives cannot be the primary culprit responsible for current levels of out-of-wedlock births. This paper presents a model that is consistent with the stylized facts and the empirical evidence but establishes a mechanism through which AFDC could in fact be the primary reason for observed levels of illegitimacy. The model is standard with one exception: How much utility individuals are able to obtain from having a child depends on the level of "social approval" that is associated with having out-of-wedlock children. This social approval is a function of the fraction of individuals in all previous generations who chose to have children out-of-wedlock, where the effect of each generation diminishes with time. While the model is successful in replicating the stylized facts on AFDC and illegitimacy and establishes a link between the two through a government induced change in "values," it also demonstrates that welfare reform aimed at reducing the incentives for poor women to have out-of-wedlock births may not be as effective as policy makers who believe in a causal link between AFDC and illegitimacy might suspect. IntroductionConcern over the rise in out-of-wedlock births, especially among teenagers, and sharp increases in the number of single headed households is widespread and growing. In the three decades following 1960, illegitimate births as a percentage of total live births rose from below 5% to over 30%, and the fraction of households headed by females rose similarly from 7% to well over 20%. 1 Today, close to one third of all births nationwide, approximately two thirds of black births and as many as 80% of births in some central cities are to single mothers. At the same time, more than half of all poor families are made up of female headed households, and children are more likely to live in poverty than members of any other age group. Given the strong link between socioeconomic background during childhood and a variety of indicators of future success, these trends are understandably disturbing to policymakers who are increasingly searching for new initiatives to encourage family formation.One set of such proposed initiatives involves either eliminating long-standing social programs which assist single mothers or altering their incentive structures dramatically. Such proposals arise from the argument that US social policy may be a significant contributing factor to increased illegitimacy and decreased family formation, a notion that is widely discussed in the literature and broadly supported by rational choice theory. Becker (1991), for example, suggests that a program like Aid to Families with Dependent Children (AFDC) "raises the fertility of eligible women, including single women, and also encoura...

The Temporary Assistance for Needy Families Program

“…Nechyba (1999) constructs a theoretical model in which social interactions between low income families causes lags in the response to a change in benefits, consistent with the hypothesis that rising welfare benefits in the late 1960s and early 1970s could have had lagged effects over the next two decades (a hypothesis also suggested by Murray (1984)). Moffitt (2000) takes a more direct approach and conducts a time series analysis of the relative importance of trends in female wages, male wages, and welfare benefits, and finds that a decline in the wages of less educated males was the main contributor to the rise in female headship, and that the decline in welfare benefits slowed that rise, thus providing one possible reconciliation between the cross-sectional and time-series evidence.…”

The Price Effects of Family Caps on Fertility Decisions of Poor Women

“…Benefit levels of states tend to be highly correlated with marginal benefit levels in those same states, making it difficult for researchers to determine which component is truly driving any fertility effect (Camasso, 2004). Cross-state comparisons are also subject to unobserved differences, which may cause benefit levels and fertility to covary across states, irrespective of any welfare policy changes (Hoynes, 1997;Nechyba, 2001).…”

“…We initially treat fertility decisions within an economic framework where the family is assumed to maximize utility (which includes the number of children as an argument) subject to constraints on its resources of money and time (Becker, 1991(Becker, , 1996Cigno, 1991). Nechyba (2001) maintains that the frequency of out-of-wedlock births in a community determine the level of social approval enjoyed by a woman if she herself becomes a single mother. Following Becker (1996) and Coleman (1990), it would be expected that women with high stocks of social capital invested in community networks that condone a reliance on public assistance would ignore the advice (threat) of a Family Cap and its message of personal responsibility for childbearing decisions.…”

“…The growing literature on social capital (Becker, 1996) and social approval (Bertrand, Luttmer & Mullainathan, 2000;Murray, 1993;Nechyba, 2001) provides some guidance here. It would be expected within this framework that women whose social capital is influenced by peers and others with extensive public assistance experiences would be reluctant to risk disapproval by these peers.…”

Identification of binary choice models with social interactions

“…From the perspective of economic theorizing, the study of social interactions is important as it integrates substantive sociological ideas with formal economic reasoning. Early applications of social interactions to substantive theoretical problems include analyses of patterns of residential segregation (Schelling, 1971) and racial inequality (Loury, 1977); recent contributions include volatility in financial markets (Brock, 1993), cross-city variation in crime (Glaeser et al, 1996), and labor market versus welfare dependence (Lindbeck et al, 1999;Nechyba, 2001). Social interactions models may also be understood as exploring the consequences for individuals of their location in social space (cf.…”