2008 Small Grants Competition: Financial Risk, Assets, and Poverty
Funded research
Lorien Rice, Mills College; and Cynthia Bansak, St. Lawrence University.
A Proposal to Examine the Effect of Relaxed Welfare Asset Rules on Auto Ownership, Employment and Welfare Rolls: A Longitudinal Analysis
Description
In this project, we propose to assess how the easing of asset tests for welfare recipiency between 1996 and 1999 affected auto ownership, employment, and welfare recipiency for the welfare-eligible population. Prior to the passage of welfare reform legislation, nearly all states exempted only $1,500 of vehicle equity from the minimum assets test that one needed to meet in order to receive cash assistance. Post-welfare reform, however, nearly all states increased the exemption limit, with twenty-eight states exempting the entire value of a single vehicle. In particular, we aim to address the following questions: 1) Did the relaxation of welfare asset rules increase auto ownership? 2) Did increased auto ownership increase employment? and 3) What is the effect of these rule changes on welfare participation?
Using longitudinal data from the 1996 Survey of Income and Program Participation, we use state-level differences and changes over time in the benefit eligibility rules to study the behavior of those who qualified for welfare in the years following the introduction of PRWORA. For the state-level welfare program rules, we use data compiled from various sources from the Urban Institute and for state-level economic conditions utilize data from the Bureau of Labor Statistics. With data combined from these three sources, we are able to test whether individuals were more likely to buy a car, find a job, and move off of welfare, depending on the welfare rules instituted in their state. While several studies have looked at the effect of relaxed asset limits on vehicle equity and employment using cross-sectional analysis, this paper uses longitudinal data techniques to assess the effects of welfare reform on auto ownership, employment and future welfare recipiency for the same individual from 1996 to 1999. The results of our study will shed light onto how asset limits can create a disincentive for the poor to save and what happens when policy makers remove these barriers to asset building and potentially give low-income individuals great economic stability.
