herbst stevens final 11-13-07 - university of baltimore.pdf

The Impact of Local Labor Market Conditions on Work and Welfare Decisions: 1 Revisiting an Old Question Using New Data November 2007 Chris M. Herbst Assistant Professor School of Public Affairs Arizona State University David W. Stevens Executive Director The Jacob France Institute University of Baltimore Abstract Using Maryland administrative data between 1996 and 2005, this paper examines the impact of local labor market conditions on work and welfare use among single mothers. Our estimates rely on the new Census Bureau Quarterly Workforce Indicators database, which provides county-level economic indicators filtered by industry, gender, and age-group. We specify a multinomial choice model to estimate the effects of local labor market variables, demographic characteristics, and controls for unobserved heterogeneity on the full set of work- welfare combinations. The results indicate that lower unemployment rates and increased new hires and new hires’ earnings in key industries increase the likelihood that women choose alternatives that include work. African American women and those with fewer years of education respond differently to changing economic conditions. Our results are robust to contro