What Did the "Illegitimacy Bonus" Reward? : Topics in Economic Analysis & Policy

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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Zulehner, Christine / Schirle, Tammy

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What Did the "Illegitimacy Bonus" Reward?

Sanders Korenman1 / Ted Joyce2 / Robert Kaestner3 / Jennifer Walper4

1Baruch College, CUNY and NBER,

2Baruch College, City University of NY,

3University of Illinois at Chicago,

4Baruch College, CUNY,

Citation Information: Topics in Economic Analysis & Policy. Volume 6, Issue 1, ISSN (Online) 1538-0653, DOI: 10.2202/1538-0653.1402, April 2006

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The Out-Of-Wedlock Birth Reduction Bonus (“Illegitimacy Bonus”), part of the 1996 welfare reform legislation, awarded up to $100 million in each of five years to the five states with the greatest reduction in the non-marital birth ratio. Alabama, Michigan, and Washington D.C. each won bonuses four or more times, claiming nearly 60% of award monies. However, for these bonus winners, changes in the racial composition of births accounted for between one-third and 100% of the decline in the non-marital birth ratio. The non-marital birth ratio fell most in D.C., averaging 1.5 percentage points per year over the award period. Declines in non-marital birth ratios in Michigan and Alabama were slight. But the non-marital birth ratio fell in D.C. in large part because the number of black children born there fell dramatically, and a decline in the black population alone accounted for one third of the decline in black births. Within-race changes in non-marital birth ratios raised the overall non-marital birth ratio 0.5 percentage points in Alabama, and lowered the non-marital ratio by one percentage point in Michigan, and by about three percentage points in Washington D.C. Because it was based on unadjusted changes in states’ aggregate non-martial birth ratios, the Illegitimacy Bonus rewarded racial/ethnic compositional changes at least as much as it rewarded declining non-marital birth ratios within major racial/ethnic groups.

Keywords: Illigitimacy bonus; birth-ratios; birth-reduction bonus

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