“Welfare Reform, Expansion of Earned Income Tax Credit, and Human Capital Formation of Single Mothers”

Job Market Paper

In the 1990s, welfare programs in the United States underwent a major transformation by adopting policies that promoted work and discouraged welfare participation among single mothers. This project studies the effect of these work-induced policies on single mothers’ human capital formation by considering the trade-off between work and investment in higher education. Specifically, I focus on two major changes in the welfare program. First, welfare reform in 1996 imposed strict work requirements and time limits on AFDC, which provided monthly cash assistance to more than 36% of low-income families with children. Second, in 1993, the government reduced the tax liability of low-income working families with children by expanding EITC at a historic rate. Exploiting variations in the timing, intensity, and eligibility conditions of programs across states as an identification strategy, I first show that work requirements and expansion of EITC decreased college enrollment rates among single mothers, whereas time limits had null effects. Motivated by these results, I extend the dynamic discrete choice model of Chan (2013) by incorporating heterogeneous returns to work experience and endogenizing the choice of college enrollment. The model shows that the reform package induced a small but positive wage gain among single mothers, primarily by increasing working experience. I find that experience compensates for the wages lost from a decline in the attainment of post-secondary education. However, using the 1992 policy environment as the baseline scenario, a 10-year simulation shows that the increase in earnings is not large enough to compensate for the loss in disposable income. Welfare analysis under a revenue-neutral condition indicates that single mothers are worse off because of the introduction of work requirements, time limits, and expansion of EITC.

“The Long-Term Career Effects of Job-Protected and Paid Leave Policies in the US: Exploiting 40 Years of Variation in Generosity and Nonlinear Eligibility”

with George-Levi Gayle and Andrés Hincapié

This research studies the effects of family leave policies on the long-term labor market out- comes of mothers following the births of their children. We merge rich sources of historical information on family leave policies across the United States since 1973 with 40 years of data from the Panel Study of Income Dynamics (PSID). Exploiting variations in timing, we first show that mothers who are exposed to such programs experience larger declines in working hours, earnings, and hourly wages relative to those who are not exposed to such programs at the time of their children’s births. Then, we exploit generosity and the nonlinear eligibility condition of the programs to show that mothers with more exposure to job-protection and paid leave policies suffer more significant negative effects on their long-term labor market outcomes. We employ an event study design with difference-in-difference and regression discontinuity to establish causal inference. Mediation analysis shows that the human capital channel is the dominant factor.

“Economic Outcome of Return Migration”

This paper studies the causal effects of migration experience on the wage premiums of returning migrants using large Indonesian panel data with rich information on migration and employment history. I first document the fact that about 40–50 percent of internal migrants who migrate for either work or education return to their pre-migration municipality within 6 years. Secondly, I show that, on average, returning migrants earn an hourly wage about 10 percent higher than that of workers who have never left, even after controlling for various human capital measures and innate ability, such as wage at the pre-migration period and elementary test scores. To solve potential selection bias, I use rainfall shock as an instrumental variable under the assumption that temporary pre-migration rainfall shocks trigger temporary migration while not affecting the economic outcomes of migration in the post-return period. The results show that migration experience has positive causal effects on wage premiums.