Welfare Benefits and Female Headship in US Time Series

There has been a considerable amount of work on the relationship between AFDC benefits and family structure in the U.S. The evidence to date which uses cross-state variation in welfare benefits and family structure, often with state fixed effects, indicates that there is some nonzero effect of those benefits on marriage and fertility, although there is disagreement on the magnitude of the effect. However, it is undisputed that time series trends in family structure are not correlated in the direction that the cross-state evidence would suggest, for real benefits have been falling, even relative to wages, in aggregate time series. This paper reexamines the time series evidence with particular attention to the role of wages in explaining trends in headship, and notes that the correct specification includes both male as well as female wages. When both are controlled, welfare benefits have a slight positive impact on female headship even in time series. The results demonstrate the importance of labor market factors in explaining trends in female headship