Do changes in oil prices affect welfare programs? Evidence from Kern County

- The relationship between oil prices and welfare programs in Kern County is studied.
- There is long run relationship between CalFresh, oil prices and unemployment.
- A 10% increase in unemployment leads to a 3.3% increase in CalFresh enrollment.
- CalWORKs is more responsive to changes in unemployment than to oil price shocks.
- Variations in CalWORKs due to oil price shocks were negligible.

In this paper, the intertemporal causal relationship between oil prices and welfare programs in Kern County is studied using monthly data between 1999:7 and 2016:8. Results from the autoregressive distributed lag (ARDL)-bounds testing approach show that there is stable long run equilibrium relationship between CalFresh caseloads, oil prices and unemployment. They also show that adjustment in CalFresh participation due to changes in oil prices and unemployment is slow, and a 10% increase in unemployment led to a 3.3% increase in CalFresh enrollment. Results from a modified Granger Causality method indicated causality running from unemployment to CalWORKs, and no causality from oil prices to CalWORKs participation. The GIRF confirmed that CalWORKs is more responsive to changes in unemployment than to oil price shocks. The FEVDC results demonstrated that contributions of the oil price shocks in explaining variations in CalWORKs were negligible.