I estimate the following linear regression model:
yit = αi + δit + γt +
k=t−entry
λkdk
it + xitβ + ηeit
+ f(sit, cit, τ) + εit (1)
where yit is the outcome of interest (i.e., quarterly earnings,
probability of employment) for individual i in quarter t. The
first three terms in Eq. (1) account for unobservable individual
and period-specific factors that affect labor market
outcomes: αi is an individual fixed effect that controls for
time-invariant, person-specific unobservable qualities, such
as ability or motivation, δit allows for individual-specific linear
trends in outcomes, and αt is a quarter-specific fixed effect
that controls for aggregate shocks that affect all individuals
in a given period. The fourth term allows for labor
market outcomes to vary in the quarters before and after welfare
entry, with dk
it indicating whether the current period is k
quarters before or after entry. xit is a vector of time-varying
observable individual characteristics, including a quadratic
term in age (allowed to vary by race/ethnicity), number of
children, age of youngest child, vehicle ownership, and indicators
for months of lifetime welfare receipt (0 months,
1 to 12, 13 to 24, 25 to 59, and 60 or more months).
I estimate the following linear regression model:yit = αi + δit + γt +k=t−entryλkdkit + xitβ + ηeit+ f(sit, cit, τ) + εit (1)where yit is the outcome of interest (i.e., quarterly earnings,probability of employment) for individual i in quarter t. Thefirst three terms in Eq. (1) account for unobservable individualand period-specific factors that affect labor marketoutcomes: αi is an individual fixed effect that controls fortime-invariant, person-specific unobservable qualities, suchas ability or motivation, δit allows for individual-specific lineartrends in outcomes, and αt is a quarter-specific fixed effectthat controls for aggregate shocks that affect all individualsin a given period. The fourth term allows for labormarket outcomes to vary in the quarters before and after welfareentry, with dkit indicating whether the current period is kquarters before or after entry. xit is a vector of time-varyingobservable individual characteristics, including a quadraticterm in age (allowed to vary by race/ethnicity), number ofchildren, age of youngest child, vehicle ownership, and indicatorsfor months of lifetime welfare receipt (0 months,1 to 12, 13 to 24, 25 to 59, and 60 or more months).
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