Previous research has studied the effects of welfare payments under the Aid to Families with Dependent Children (AFDC) program on incentives and behavior. By lowering the cost of raising children, states with larger welfare payments have higher rates of fertility among poor women, an adverse consequence. In previous papers, we concluded that by lowering the cost of unprotected sexual activity, greater welfare payments are associated with higher rates of sexually transmitted diseases, including HIV. The restructuring of the welfare system in 1996 transformed AFDC into time limited assistance with an emphasis on work and personal responsibility. We test whether this program (Temporary Assistance for Needy Families, or TANF) has succeeded in eliminating the adverse incentive structure existing under AFDC. Using GLS and IV estimation procedures on state data from 1993 through 2002, we find that the effect of TANF payments on heterosexual HIV incidence is significantly less than under AFDC.


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