Welfare Reform and Asset Accumulation: Asset Limit Changes, Financial Assets, and Vehicle Ownership

Objective. Over the past decade, federal and state governments have substantially liberalized asset limits in welfare. This paper examines whether this policy change promotes asset accumulation among the target population of actual and potential welfare recipients. Methods. Utilizing household data from the Panel Study of Income Dynamics and state data, this study employs a difference-in-difference approach in order to determine whether state asset limits affect the target population’s financial and vehicle asset accumulation. This study develops a new policy measure that considers the time period following the adoption of liberalized asset limits. Results. Analysis results suggest that increased asset limits may have successfully encouraged the target population’s asset accumulation. The earlier a state raised its asset limit, the more likely welfare recipients were to accumulate financial assets and to possess bank accounts. Conclusion. It is recommended to liberalize asset eligibility rules to promote long-term economic advancement of poor households.

Subsequent publication: Nam, Y. (2008). Welfare reform, asset limits, and financial asset accumulation among low-income households. Social Science Quarterly, 89(1), 133–154. doi:10.1111/j.1540-6237.2008.00525.x

Project: Welfare Reform, Asset-Limit Policy, and Asset Accumulation