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AFDC Payments and Illegitimacy Ratios: A Reappraisal of Endogeneity Using Panel Data
Author(s) -
Caudill Steven B.,
Mixon Franklin G.
Publication year - 2000
Publication title -
american journal of economics and sociology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.199
H-Index - 38
eISSN - 1536-7150
pISSN - 0002-9246
DOI - 10.1111/1536-7150.00037
Subject(s) - endogeneity , economics , fertility , demographic economics , econometrics , panel data , percentage point , payment , labour economics , demography , population , sociology , finance
This paper develops a rational choice model of the fertility of single women in the presence of government transfers. Evidence is presented which suggests that real AFDC (Aid to Families with Dependent Children) bene~ts leads to higher rates of illegitimacy. In fact, the unbiased parameter estimate which we present is six times larger than those estimates using OLS (Caudill and Mixon 1993). Also, the point elasticity estimate of real public benefit levels with respect to changes in the illegitimacy rate produced in this study is very robust, approximately +1.4. Our result, which encompasses all fertility of single women in the U.S., is quite encouraging because it falls within an elasticity range of +1.3 to +2.1 produced by a recent study (Clarke and Strauss 1998) for black and white teen fertility (for single women), respectively.