Did Welfare Reform Cause the Caseload Decline?

The federal Temporary Assistance for Needy Families (TANF) program, created in 1996 to replace Aid to Families with Dependent Children (AFDC), devolved considerable policy-making responsibility to states. In the 2006 reauthorization of TANF, Bush administration officials and others proclaimed welfare reform a dramatic success, yet research has not comprehensively assessed the extent to which specific welfare policies caused the caseload to decline. Employing 7 years of AFDC data and 9 years of TANF data, in combination with methods sensitive to the effect of gradually implemented policies on caseload stocks, this work obtains plausible estimates of the effects of the economy and of four policies (financial incentives, sanctions, time limits, and diversion) that characterize the shift from AFDC to TANF. Simulations imply that the examined policies pushed the caseload down in the 1990s but that neither they nor the economy can explain the majority of the decline.