INTERACTIONS BETWEEN WELFARE CASELOADS AND LOCAL LABOR MARKETS

This paper provides an empirical examination of interactions between welfare caseloads and local labor markets using data on caseload stocks, entries, and exits. Granger-causality tests show that unemployment rates Granger-cause caseload activity but caseload activity does not Granger-cause unemployment rates. The results also reveal differential dynamics between caseloads and labor market conditions for rural versus metropolitan markets. Several models of one-way association between caseload activity and unemployment rates are presented. The results show that higher unemployment rates are positively associated with welfare caseloads and entries and negatively related to exits. (JEL I38, R23)