Welfare, Child Support and Strategic Behavior: Do High Orders and Low Disregards Discourage Child Support Awards?

Ethnographic and qualitative research have documented strategic behavior among low-income parents in response to child support and welfare policy, including the acceptance of ’under-the-table’ child support payments and noncooperation with child support authorities. In particular, low-income parents of children on welfare have an incentive to avoid the formal child support system, since most states limit the amount of formal child support that women on welfare can receive (’the child support disregard’) and have high child support orders for low-income fathers relative to the disregard and paternal income. Yet there has been relatively little quantitative research that examines whether parents of children on welfare behave strategically in response to child support policy. This paper develops a simple game-theoretic model to make several predictions regarding how the child support disregard and order among low-income parents might interact to influence the development of formal child support orders, versus informal ones or none at all. In particular, the theoretical model predicts that lower disregards should decrease the incidence of formal child support orders and that higher child support orders may have ambiguous effects on the establishment of formal child support orders as compared to under-the-table payments or no child support payments, although high orders relative to the disregard should reduce formal child support. Using data from the CPS-CSS from 1994 to 2000 merged with state child support variables such as the disregard level, low-income child support level, and several other child support enforcement variables, I estimate the effects of the disregard and order amounts on: 1) the existence of a legal child support order, and 2) the existence of an informal agreement versus no order, or a legal child support order. I find results that are generally consistent with the theoretical model: higher orders among low-income fathers are associated with fewer legal child support orders, while higher disregards are associated with more formal child support agreements versus informal agreements or none at all.