Does Aid to Families with Dependent Children Displace Familial Assistance?

Proponents of reducing welfare assistance argue that the family would respond to the increased need of single mothers by providing more assistance if the state lowered welfare benefits. The objective of this study is to estimate whether income received from AFDC displaces private familial assistance in the form of cash and time help. It is found that displacement is precisely estimated among blacks but not whites. The estimates for blacks suggest that annual familial cash received is reduced by 17 cents per dollar increase in AFDC benefits, and time help received is reduced by 75 hours per year per 1,000 increase in AFDC benefits. As a result, family members who would have given greater amounts of assistance under a less generous welfare program now, themselves, have greater income equal to the amount they otherwise would have transferred. Although these may not be the people to whom the program is directly attempting to assist, it is found that they too are quite poor and needy.