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Previous literature shows that activation requirements for welfare recipients reduce welfare participation. However, the effect of mandatory activation on welfare entry and exit rates has not been fully examined. In this article, we use a rich set of register data that covers the entire population of Stockholm to study how the introduction of activation programs aimed at unemployed welfare recipients in various city districts affects the probability of individuals entering and exiting social assistance (SA). Our results show that mandatory activation has no overall average effects on SA entry or SA exit. However, we do find a significant negative effect of mandatory activation on the SA entry rate for young individuals and for unmarried individuals without children. For unmarried individuals without children, we find a positive but statistically insignificant effect on the probability to leave SA. Thus, individuals with fewer family responsibilities seem to be more responsive to the reform.

Welfare reform banned newly arrived immigrants who came to the US after 1996 from receiving federally funded benefits for five years. One assessment of the success of the five-year ban is the effect it has on behaviors that determine economic success and the likelihood of becoming a public charge. In this chapter, we investigate the effect of the five-year ban on the employment, hours of work, and wages of low-income women. Our results indicate that welfare reform in general caused a significant increase in the employment of low-educated, unmarried mothers regardless of citizenship. Among non-citizens, welfare reform was associated with a 10 percentage point (26%) increase in employment, a two-hour (15%) increase in hours worked per week, and a 10 percent decrease in wages. Surprisingly, we find little evidence that the five-year ban had any additional effect on the employment, hours of work, and wages of low-educated and unmarried, non-citizen mothers.

This study investigates the effects of a broad-based policy change that altered maternal employment, family income, and other family characteristics on drug-related crime among youth. Specifically, we exploit differences in the implementation of welfare reform in the United States across states and over time in the attempt to identify causal effects of welfare reform on youth arrests for drug-related crimes between 1990 and 2005, the period during which welfare reform unfolded. We use monthly arrest data from the U.S. Federal Bureau of Investigation’s Uniform Crime Reports to estimate the effects of welfare reform implementation on drug-related arrests among 15- to 17-year-old teens exposed to welfare reform. The findings, based on numerous different model specifications, suggest that welfare reform had no statistically significant effect on teen drug arrests. Most estimates were positive and suggestive of a small (3%) increase in arrests.

This paper examines the effect of welfare reform policies on changes in poverty in the United States during 1992–2005. Using state-level panel data we estimate latent trajectory models to determine if welfare reform has contributed to changes in the trajectories of poverty growth (decline) beyond what would have naturally occurred through the passage of time. Our results show that (a) states vary considerably in both their mean initial level as well as trajectories of poverty; (b) welfare reform was responsible for nearly 27% of the decline in poverty during the study period; (c) the economy played a secondary role, responsible for a 10% reduction in poverty; and (d) income support policies like minimum wage and child support collection also had an important role to play, with the latter contributing as much as welfare reform to poverty reduction. Our estimates remain robust against changes in modeling strategies and methods.

The purpose of this paper is to provide a summary of empirical research on welfare magnetism and to assess the size and scope of the welfare magnet effect on the non-EU migrants in selected immigration countries of the European Union.

A conditional logistic regression model with interactions is used to estimate the strength of the welfare magnet effect, while controlling for demographic characteristics of the migrants and country-specific economic indicators. Data, used for estimation, comes from the Immigrant Citizen Survey, which provides a large, representative sample of first-generation (i.e. non-EU born) migrants. Various measures of welfare generosity are tested to assure the robustness of the results.

The coefficients suggest that the welfare magnet effect is present and significant in some immigrant groups, although it can have a negative impact on location decisions in other cases. Similar results are obtained for wage and unemployment indicators.

Results corroborate the welfare magnet hypothesis, which states that more generous welfare states should expect greater clustering of negatively-selected (i.e. lower educated) migrants. One potential limitation comes from the sample size, which does not allow for more general conclusions.

Heterogeneous effects of basic economic indicators in different demographic groups show that aggregate immigrant flows, used widely in the literature, can provide biased estimates of welfare magnet effect.

This paper adds to the available literature by using representative, recently collected data and employing a more complete list of controls in a quantitative analysis of migration decisions.

We have used the Michigan computable general equilibrium (CGE) model of World Production and Trade to calculate the aggregate welfare and sectoral employment effects of the menu of U.S.–Japan trade policies. The menu of policies encompasses the various preferential U.S. and Japan bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade barriers by the two countries, and global (multilateral) free trade. The U.S. preferential agreements include the FTAs approved by the U.S. Congress with Chile and Singapore in 2003, those signed with Central America, Australia, and Morocco and awaiting Congressional approval in 2004, and prospective FTAs with the Southern African Customs Union (SACU), Thailand, and the Free Trade Area of the Americas (FTAA). The Japanese preferential agreements include the bilateral FTA with Singapore signed in 2002 and prospective FTAs with Chile, Indonesia, Korea, Malaysia, Mexico, Philippines, and Thailand. The welfare impacts of the FTAs on the United States and Japan are shown to be rather small in absolute and relative terms. The sectoral employment effects are also generally small in the United States and Japan, but vary across the individual sectors depending on the patterns of the bilateral liberalization. The welfare effects on the FTA partner countries are mostly positive though generally small, but there are some indications of potentially disruptive employment shifts in some partner countries. There are indications of trade diversion and detrimental welfare effects on nonmember countries for some of the FTAs analyzed. Data limitations precluded analysis of the welfare effects of the different FTA rules of origin and other discriminatory arrangements.

In comparison with the welfare gains from the U.S. and Japan bilateral FTAs, the gains from both unilateral trade liberalization by the United States, Japan, and the FTA partners and global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system. The U.S. and Japan FTAs are based on “hub” and “spoke” arrangements. We show that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral FTAs may create distortions of the global trading system.

The study aims to assess the effect of English and French language literacy on the welfare of Ghanaian women in trade. Also, this study analyses the geographical variations of such effects from rural to urban areas.

Using the latest living standards survey data, the standard two-stage least squares instrumental variable approach was used to estimate the causal effects.

The results show that Ghanaian women in trade who are both English and French literate or only English literate are able to improve their welfare significantly relative to their fellows who are illiterate in both English and French or only English, whilst those who are solely French literate do not experience any significant improvement in welfare from trade compared with their counterparts. From the heterogeneous analysis, the findings indicate that the effect is significantly concentrated amongst rural traders but insignificant amongst urban traders.

The findings of this study inform government and policymakers to consider the effectiveness of the free senior high school (SHS) education policy in improving English and French language literacy and the welfare of women in Ghana. It also informs educational institutions on the importance of adult education in English and French, especially amongst women.

The study quantitatively estimates the effect of English and French language literacy on the welfare of Ghanaian women in trade by employing an instrumental variable approach to assess the causal effect. Uniquely, the study finds that language literacy is a significant tool in improving the welfare of rural women engaged in trade in Ghana.

In games with strategic complementarities, public information about the state of the world has a larger impact on equilibrium actions than private information of the same precision, because the former is more informative about the likely behavior of others. This may lead to welfare-reducing “overreactions” to public signals as shown by Morris and Shin (2002). Recent experiments on games with strategic complementarities show that subjects attach a lower weight to public signals than theoretically predicted. The purpose of this paper is to reconsider the welfare effects of public signals accounting for the weights observed in experiments.

Aggregate behavior observed in experiments on games with strategic complementarities can be explained by a cognitive hierarchy model where subjects employ limited levels of reasoning. They respond in a rational way to the non-strategic part of a game and they account for other players responding rationally, but they neglect that other players also account for others’ rationality. This paper analyzes the welfare effects of public information under such limited levels of reasoning.

In the model by Morris and Shin (2002) public information is always welfare improving if strategies are derived from such low reasoning levels. The optimal degree of publicity is decreasing in the levels of reasoning. For the observed average level of reasoning, full transparency is optimal, if public information is more precise than private information. If the policy maker has instruments that are perfect substitutes to private actions, the government should secretly respond to its information without disclosing or signaling it to the private sector independent of the degree of private agents’ rationality.

This paper takes experimental evidence back to theory and shows that the main result obtained by the theory under rational behavior breaks down if theory accounts for the bounded rationality observed in experiments.