The price effects of Family Caps on fertility decisions of poor women

Family Caps have been a popular welfare reform policy designed to discourage women on welfare from bearing additional children. It has been thought that the principal mechanism through which a Cap achieves its objective of lower birth rates is the financial pressure placed on women by the denial of cash benefits. Our study uses instrumental variables Probit modeling to directly measure the contribution that price makes to Cap impact on births. We reexamine data from the New Jersey Family Development Program (n = 8,393) experiment and find that only a very small percentage (about 2.5%) of the overall Family Cap effect reported in earlier studies can be attributed to price. Moreover, the price effect holds only for short-term Black welfare recipients. We speculate that much of the unexplained Family Cap treatment effect stems from a message of social pressure and disapproval toward welfare receipt and childbearing on welfare. We offer a possible direction for future research which would directly measure the social disapproval component.