What Mean Impacts Miss: Distributional Effects of Welfare Reform Experiments
Marianne Bitler, RAND
Jonah B. Gelbach, University of Maryland
Hilary W. Hoynes, University of California, Davis
Standard labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings, transfers, and total income. Simulation evidence suggests this heterogeneity could be important. We use experimental data to estimate quantile treatment effects of Connecticut's Jobs First reform. We find considerable evidence of systematic heterogeneity, consistent with theory. Moreover, a focus on mean impacts computed for subgroups would have missed important findings. Earnings fall at the very top of the distribution, as theory predicts should happen. However, Jobs First has essentially no impact on earnings at the bottom of the distribution. Income at the bottom deciles is constant before time limits hit (contrary to large positive mean impacts for a disadvantaged subgroup) and falls afterwards (again contrary to a zero effect using means). These findings suggest cause for concern about the ability of programs like Jobs First to end welfare dependence of significant numbers of women.