QUARTERLY JOURNAL OF ECONOMICS
In the March CPS sample, the age for tax purposes is the age at the time of the March interview. We subtract one for AFDC and Medicaid purposes. In the ORG sample, we use the age at the time of the interview for AFDC and Medicaid, but for tax purposes, we add one for interviews occurring between January and June.
Women have no unearned income (including child sup- port) or assets, and their children have no earned income, unearned income, or assets; hence, earnings determine their program eligibility.
Single mothers are assumed to le as head of household and claim their children as dependents, while single women without children le as single. Also, all women take the standard deduction.
Women receiving AFDC are in their rst four months of work and do not claim child care expenses.25
Single women without children do not receive Food Stamps.
Shelter costs (an input in Food Stamp calculations) vary only by state and over time.
Tax, Welfare, and Medicaid Variables
First, for each woman we calculate ve quantities: income tax liabilities (federal and state income taxes incorporating federal and state EITCs); welfare benets (AFDC plus Food Stamps); AFDC receipt (indicator for AFDC eligibility); and Medicaid adults covered and Medicaid children covered. Under the assump- tions above, these calculations are made at 50 annual earnings levels generated from the cells of a joint wage/hours distribution. The 50 cells come from a combination of ve annual hours levels (500, 1000, 1500, 2000, and 2500) and ten hourly wage levels (4, 5, 6, 7, 8, 10, 12, 15, 20, and 25).
Second, we use the wage/hours distributions described in the text to weight the above quantities. We calculate the distributions using only women with more than $500 of annual earnings. We then construct the following variables.
25. These assumptions are roughly consistent with the facts. In scal year 1995, over two-thirds of AFDC families with earnings were in their rst four months of work, and only about 16 percent of AFDC families with earnings claimed child care expenses [U. S. Department of Health and Human Services, Characteristics of AFDC Recipients 1996].