2. In 1999, 4,860 Temporary Assistance for Needy Families (TANF) recip- ents wer

ID: 1145868 • Letter: 2

Question

2. In 1999, 4,860 Temporary Assistance for Needy Families (TANF) recip- ents were asked how many hours they worked in the previous week. In 2000, 4,392 of these recipients were again subject to the same TANF rules and were again asked their hours of work during the previous week The remaining 468 individuals were randomly assigned to a "Negative Income Tax" (NIT) experiment that gave out financial incentives for wel- fare recipients to work and subjected them to its rules. Like the other group, they were asked about their hours of work during the previous week. The data from the experiment are contained in the table below. Total # # of Recipients who worked Total Hours of Work by of Recipients at some time last week 1999 TANF 4,3921,217 468 131 Total 4,8601,348 20001999 1,56815,578 2131,638 1,78117,216 All Recipients Last Week 2000 20,698 2,535 23,233 NIT (a) What effect did the NIT experiment have on the employment rate of public assistance recipients? Develop a standard difference-in differences table to support your answer.

Explanation / Answer

SOLUTION:

(A)

1999

2000

Difference

Diff-in-Diff

TANF

27.70%

35.70%

8.00%

NIT

28.00%

45.50%

17.50%

9.50%

The NIT increased the employment probability by 9.5 percentage points