| Abstract: |
This paper examines whether AFDC/TANF asset tests affect the asset holdings of
low-educated single mothers, exploiting variation in asset limits and
exemptions across states and over time. There are important reasons to examine
vehicle assets in this context. For example, vehicles make up a very
significant share of total wealth for poor families, and the variation in
vehicle exemptions over time and across states far exceeds the variation in
asset limits. Consistent with other recent research, I find little evidence
that asset limits have an effect on the amount of liquid assets that single
mothers hold. However, I find evidence that vehicle exemptions do have an
important effect on vehicle assets. The findings suggest that moving from a
$1500 vehicle exemption to a full vehicle exemption increases the probability
of owning a car by 20 percentage points for low-educated single mothers
relative to a comparison group. Also, the results indicate that single mothers
are not substituting vehicle equity for liquid assets in response to more
relaxed restrictions on vehicles. |