Testing the Asset-Based Theory of American Social Welfare: Does a Future-Orientation Mediate the Relationship between Asset-Ownership and Financial Responsibility?

The ownership of financial assets protects American households from experiencing the struggles of income poverty. The asset-based theory of American social welfare, which was conceptualized by Professor Michael Sherraden in 1991 and amended in 2001 by other scholars, posited that social welfare programs diminish the prevalence of poverty by enabling households to save funds to purchase assets. This theory has been scantly tested—especially among American households—despite a great amount of funds being invested into programs designed to help low-income American households to build assets. The only previous study that examined the intermediary role of future-orientations on the effect of asset-ownership on a financial outcome operationalized assets as comprised primarily of farm animals (i.e., oxen, chicken, pigs, etc.), in a manner that deviates substantively from the original conceptualization of the asset-based theory of American social welfare. This dissertation research endeavored to remedy this limitation within the asset-ownership literature by utilizing data from a representative survey sample of American households—namely the Panel Study of Income Dynamics and the accompanying Transition-to-Adulthood Supplement—to empirically test the theory using structural equation modeling analyses. Structural equation modeling analyses of the data suggested that young adults’ future-orientations positively partially mediated the effect of parental asset-ownership on young adults’ financial responsibility. Specifically, parental asset-ownership had an important direct effect (β = -0.174, z = -6.91, p = 0.000) on young adults’ financial responsibility, coupled with an important mediation effect of young adults’ future-orientations (β = 0.012, z = 4.17, p = 0.000) on the relationship between parental asset-ownership and young adults’ financial responsibility. The mediation effects implied that the design of asset-development programs should integrate components into the structure of the programs that empower the low-income participants to think and talk about their future-orientations and plans