Regression Analysis of Temporary Assistance for Needy Families/Aid to Families with Dependant Children for 1970-2004

Regression Analysis of Temporary Assistance for Needy Families/Aid to Families with Dependant Children for 1970-2004

By: Ryan Rafacz

By: Ryan Rafacz

Background On Welfare

Background On Welfare

• Early welfare programs began in 1601 with the English Poor Law

• Introduction of a welfare program in the United States after the Great Depression as part of Roosevelt’s “New Deal”

• President Clinton signed welfare reform into law in 1996.

• Early welfare programs began in 1601 with the English Poor Law

• Introduction of a welfare program in the United States after the Great Depression as part of Roosevelt’s “New Deal”

• President Clinton signed welfare reform into law in 1996.

Hypothesis Hypothesis

• A rise in unemployment and total number of recipients will cause upward pressure on welfare costs, while a rise in two-parent families will cause TANF expenditure to fall.

• See how this relates to time

• A rise in unemployment and total number of recipients will cause upward pressure on welfare costs, while a rise in two-parent families will cause TANF expenditure to fall.

• See how this relates to time

Research Data

The data is time series data from 1970-2004The data collected for this regression came from the Department of Health and Human Services as well as the Bureau of Labor Statistics.http://aspe.hhs.gov/hsp/indicators06/apa.pdfhttp://www.bls.gov/cps/prev_yrs.htm

TANF/AFDC Expenditure By YearYear Total Expenditure Total Recipients Unemployment Rate Two Parent Families Time Trend1970 17,856 8,303 4.9 78 11971 22,936 1,043 5.9 143 21972 26,504 10,736 5.6 134 31973 27,199 10,738 4.9 120 41974 26,368 10,621 5.6 93 51975 27,427 11,131 8.5 100 61976 29,533 11,098 7.7 135 71977 29,514 10,856 7.1 149 81978 28,310 10,387 6.1 128 91979 26,420 10,140 5.8 114 101980 26,410 10,599 7.1 141 111981 25,804 10,893 7.6 209 121982 24,189 10,161 9.7 232 131983 24,502 10,569 9.6 272 141984 24,891 10,643 7.5 287 151985 24,401 10,672 7.2 261 161986 24,917 10,850 7 254 171987 26,010 10,841 6.2 236 181988 25,595 10,728 5.5 210 191989 25,395 10,798 5.3 193 201990 26,123 11,497 5.6 204 211991 27,463 12,728 6.8 268 221992 29,294 13,571 7.5 322 231993 28,610 14,007 6.9 359 241994 28,646 13,970 6.1 363 251995 27,049 13,242 5.6 335 261996 24,442 12,156 5.4 301 271997 20,509 10,224 4.9 256 281998 16,828 8,215 4.5 162 291999 15,218 6,709 4.2 125 302000 12,264 6,043 4 132 312001 10,800 5,631 4.7 119 322002 9,852 5,529 5.8 118 332003 10,456 5,426 6 116 342004 10,368 5,279 5.5 113 35

TheoryTheory

• To test this hypothesis I collected data from my sources placed it in a table and ran a regression using excel hoping to get results supporting my hypothesis.

• To test this hypothesis I collected data from my sources placed it in a table and ran a regression using excel hoping to get results supporting my hypothesis.

EquationEquation

Yt=B1+B2X2+B3X3+B4X4+B5t+ut

Yt=TANF Expenditure X2=Total Recipients X3=Unemployment Rate X4=Two Parent Families t =Time Trend

Yt=B1+B2X2+B3X3+B4X4+B5t+ut

Yt=TANF Expenditure X2=Total Recipients X3=Unemployment Rate X4=Two Parent Families t =Time Trend

Regression OutputRegression OutputRegression Statistics

Multiple R 0.942662216R Square 0.888612053Adjusted R Square 0.873760327Standard Error 2175.467179Observations 35

ANOVA

  df SS MS FSignificance

F

Regression 4 1132661987 283165496.6 59.83224011 7.22428E-14

Residual 30 141979723.4 4732657.445Total 34 1274641710     

  CoefficientsStandard Error t Stat P-value Lower 95%

Intercept 15716.76678 2584.437784 6.081309785 1.11106E-06 10438.6407

Total Recipients 1.072413732 0.192447997 5.572485818 4.62942E-06 0.679382491

Unemployment Rate -97.14875536 327.7421632-0.296418241 0.768953135 -766.4875458Two Parent Families 21.45442411 7.143294495 3.003435478 0.005343576 6.865870569

Time Trend -370.4313997 47.63185022 -7.77696852 1.11987E-08 -467.7086151

Result InterpretationResult Interpretation

R2=.888

Significance F=7.224E-14 X2 – as total recipients rises by 1 TANF rises by about 1

X3 – as unemployment rises by 1 TANF decreases by about 97

X4 – as the number of two parent families receiving TANF rises by 1 TANF expenditure rises by about 21.5

t – shows over time with each year that passes TANF expenditure decreases by about 370

R2=.888

Significance F=7.224E-14 X2 – as total recipients rises by 1 TANF rises by about 1

X3 – as unemployment rises by 1 TANF decreases by about 97

X4 – as the number of two parent families receiving TANF rises by 1 TANF expenditure rises by about 21.5

t – shows over time with each year that passes TANF expenditure decreases by about 370

Things To ConsiderThings To Consider

• 1st order autocorrelation• Due to using a time trend autocorrelation must be examined.

• Using both a graph of the residuals as well as using the Durbin-Watson test.

• 1st order autocorrelation• Due to using a time trend autocorrelation must be examined.

• Using both a graph of the residuals as well as using the Durbin-Watson test.

Autocorrelation Test

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

0 5 10 15 20 25 30 35 40

Time

e Series1

Durbin-Watson TestDurbin-Watson Test

• (Σ(et-et-1)2) = 210370576.8

• Σ(et2) = 141979723.4

• (Σ(et-et-1)2)/Σ(et2) = 1.481694511

• (Σ(et-et-1)2) = 210370576.8

• Σ(et2) = 141979723.4

• (Σ(et-et-1)2)/Σ(et2) = 1.481694511

Lower Critial Value

Upper Critial Value

dL du

1.222 1.726

Durbin-Watson Value

n=35; k=4

Durbin-Watson Value

n=35; k=4

1.222 1.7261.481694511

ConclusionConclusion

• Findings– There is a significant effect on welfare expenditure with a rising number of recipients and two-parent families, but over time we have a decreasing expenditure.

• Further Reseach– Look at labor-force participation– Look at income of low-skilled workers– Effects of Welfare reform

• Findings– There is a significant effect on welfare expenditure with a rising number of recipients and two-parent families, but over time we have a decreasing expenditure.

• Further Reseach– Look at labor-force participation– Look at income of low-skilled workers– Effects of Welfare reform