Do Welfare Asset Limits Affect Household Saving?

Abstract

We use data from the Panel Study of Income Dynamics to estimate the effect of new saving incentives implemented as part of the 1996 welfare reform on household saving. Economic theory predicts that loosening asset limits will increase total savings for households with a large ex-ante probability of welfare receipt such as female-headed households with children. We follow a sample of female heads with children and find that in both absolute terms, and relative to comparison groups of male heads and female heads without children, there has been no effect of welfare policy changes on the saving of at-risk households.