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Welfare Use when Approaching the Time Limit

Time limits reduce caseloads directly by cutting off benefits after a time-limited usage, but may also provide families with an incentive to reduce welfare use in order to conserve their benefits. Both effects depend on the stock of remaining months of eligibility. This is the first empirical study to incorporate information on this crucial determinant of takeup and eligibility under time limits. Accounting for the potential endogeneity of an individual’s past use, time limits are estimated to have decreased welfare use by 25 percent between 1996 and 2003. Roughly one-fifth of this reduction is due to behavioral responses.