Question: It is sometimes asserted that the welfare system creates a form of intergenerational "dependency." That is, children born into households that receive welfare will themselves become more apt to receive welfare when they attain adulthood. The data found at http://www.wiley.com/college/ashenfelter provide information on the following variables:
Recwelfm = 1 if the mother received welfare.
Recwelfd = 1 if the mother's daughter received welfare when she attained adulthood.
hiFaminc = the log income of the mother's family.
a. What percentage of daughters received welfare? What is the percentage among daughters whose mothers received/did not receive welfare? Do the raw data suggest grounds for a "de-pendency" effect?
b. Estimate the model Recwelfdi = β0 + βiRecwelfrai + εi using OIS. What is the effect of maternal receipt on her daughter's welfare receipt in adulthood?
c. Now, estimate a probit model relating the daughter's welfare receipt to her mother's welfare receipt. Calculate the effect of maternal welfare receipt on the probability the daughter re-ceives welfare as an adult using the estimated coefficients.
d. Repeat (b) and (c) including Famine in the model. What do you conclude?