On the compassion of time-limited welfare programs

Supporters of recent welfare reforms argue that time limits and other eligibility restrictions serve recipients. We present a simple model of agents with present-biased preferences to investigate the theoretical validity of this claim. We first identify four types of outcome that describe the behavior of a present-biased agent in the absence of time limits. We then show that the behavioral consequences of time limits are contingent on which outcome characterizes the agent’s behavior in the absence of time limits. We show that under some conditions the imposition of time limits may improve the wellbeing of welfare recipients evaluated both in terms of long-run, time-consistent utility and the periodone self’s utility. This benefit of time limits may come either from allowing the welfare eligible to start working earlier than they otherwise would or, contrary to the intent of the reforms, from allowing them to postpone working. D 2002 Elsevier B.V. All rights reserved. JEL classification: I38; J22