|Detailed Objective: To use advanced cointegration modeling techniques to assess the relationships among the macroeconomy and welfare reform on food stamp caseloads.
Recent research has attempted to quantify the relationship between movements in Food Stamp Program (FSP) caseloads, movements in the macroeconomy and the implementation of welfare reform. From a policy perspective, interest has focused primarily on estimating what part of the recent decline in FSP caseloads can be attributed to improvement in the macroeconomy and what part to welfare reform. A well-specified model of the FSP caseload should also be able to provide an explanation for the rapid increase in FSP caseloads in the early part of the decade. Recent research has indicated evidence of a cointegrating relationship between annual FSP caseloads, the unemployment rate, employment growth and caseloads of cash welfare (Aid to Families with Dependent Children/Temporary Assistance for Needy Families) at the State level. These conclusions are hampered by the fact that there are only a small number of time series observations for any particular State. Estimating cointegrating relationships using the panel structures of the States provides a way to increase the degrees of freedom and thus the precision of estimated effects. In addition, efforts to estimate the macroeconomic impact on either FSP or AFDC/TANF caseloads have used single equation specifications. This project will attempt to model FSP and AFDC/TANF caseloads jointly.