SIEPR Policy
paper No. 06-024
Separating Psychological Costs from Time Costs:
Female Labor Supply and Participation in Food Stamps and WIC
By
Colleen Flaherty and Kevin Mumford
February 2007
Many individuals who are eligible for welfare choose not to participate. This well- documented fact suggests that there is a utility cost associated with welfare participation. Previous studies have produced estimates of how large this cost would have to be to explain the observed degree of non-participation. Prior estimates of this utility cost have not dif ferentiated psychological costs of participation from the time and effort required to become eligible and maintain eligibility (time costs). This paper develops a structural model that allows for the separate estimation of these two types of costs associated with welfare par ticipation in dollar terms. The estimation suggests that psychological costs are three times larger than the time costs of welfare participation.