Why Did the Welfare Caseload Decline?

A substantial literature has considered the effects of welfare reform policies on the aggregate caseload but has been less successful in disaggregating the effects of specific policies. Using monthly caseload data from October 1989 through June 2003, we estimate a flexible model for the dynamic response of the welfare caseload to the economy and to the three major welfare reform policies. Our results are consistent with the predictions of economic theory and indicate the importance of carefully specifying the intensity and dynamics of policy changes and of including a rich set of measures of the economy.