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How Important are Economic Incentives for States in Child Support Enforcement?

Alfred Tat-kei Ho and Maureen A. Pirog

Child support enforcement has been suggested as a measure to reduce federal welfare spending and at the same time, to improve the well-being of families with single parents.  To encourage the full cooperation of child support enforcement (CSE)  agencies in each state to implement the policy stringently, the federal government has devised several financial mechanism.  This paper analyzes how the state CSE agencies respond to the economic incentives and why some states fail to take the full advantage of the federal policy.  A dynamic , integer programming technique is used to identify the "optimal" bundle of AFDC and non-AFDC caseloads for each state, which are then compared to the actual caseloads to determine if the economic incentives really matter.  The paper uses the 1991, 1993, 1995 data to discover if there were significant changes in the fiscal and allocative behavior of state CSE agencies over time.  The findings show that state CSE agencies tend to "over-serve" non-AFDC cases. The sub-optimal non-AFDC caseload persisted through the early 1990's and did not show any signs of change.  AFDC caseloads, on the other hand, seem to come closer to the "optimal" caseload level over time.  A regression analysis is done to analyze why some states are more responsive to economic incentives and some are not.  Finally, sensitivity analysis is used to show how the incentives for processing   AFDC and non-payment structure.  The results show that it is highly unadvisable to reduce the incentive payments for non-AFDC cases, which was proposed as a solution to reduce the federal deficits in the CSE program.

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