The effect of incremental benefit levels on births to AFDC recipients

We examine the relationship between fertility and incremental AFDC benefits using the 1990 Panel of the Survey of Income and Program Participation (SIPP). Estimating a logit equation for the probability of a higher-order birth among a sample of AFDC recipients, we find a positive coefficient (although statistically insignificant) on the incremental AFDC benefit level. However, we find a positive correlation between incremental benefits and fertility for several nonrecipient comparison groups which is larger than the positive correlation for AFDC recipients. This finding suggests that the previously estimated relationship between incremental benefits and fertility among AFDC recipients is largely the result of a spurious correlation. We find similar results among whites, blacks, and never-married women, but less consistent results among Hispanics and divorced or separated women. We infer from these results that family cap policies, which eliminate the incremental benefits entitled to AFDC recipients who have additional children, are not likely to result in a large reduction in the number of out-of-wedlock births to AFDC recipients.