Contextualizing Welfare's Work Disincentive: The Case of Female‐headed Family Poverty

The conventional model of the relationship between welfare incentives and poverty rates holds that welfare payments produce an income‐enhancement effect that removes families from poverty until some threshold. Beyond this point increased payments engender a work‐disincentive effect resulting in increased rates of poverty. We challenge the model's assumption that poverty levels are a simple and spatially invariant response to welfare incentives, contending instead that local employment conditions may substantially alter the relation. Our reformulation of the conventional modeling approach is based on the expansion method. Specifically, we extend the model to include the effects of local labor‐market conditions on the response of poverty levels to welfare incentives. In contesting the invariance assumption, the expansion method allows us to determine where and in what contexts welfare is “work discouraging.” The empirical analysis, which is undertaken at the county level, indicates that welfare payments vary in their influence on poverty rates across different employment contexts. A national map portraying this parameter instability demonstrates that female‐family poverty rates are most responsive to welfare assistance in the rural South and least responsive in the metropolitan Northeast. Finally, we examine two sharply contrasting locales to illustrate how poverty is governed by specific employment and welfare characteristics. 1994 The Ohio State University