The effect of policy narratives on economic outcomes: The case of welfare stigma

Many public policies are accompanied by narratives which exist independently of the formal policy text. This paper focuses on narratives around welfare benefits. Popular narratives around welfare benefits have taken many forms, from Reagan's `Welfare Queen' in the US, `welfare Wednesday' in Canada, to `Florida Rolf' in Germany. First, we provide descriptive evidence on the prevalence of narratives about welfare across the UK, USA, Germany and France. Using data from national newspapers across these four countries and natural language processing techniques, we find that on average 1 in 100 articles mentions welfare, with the highest levels in the UK and the lowest in France. Second, focusing on the UK, we look at the causal effect of these narratives on beliefs, welfare benefit take-up and labour market decisions. Using an event study design, around the publication of negative stories, we find a decrease of 4 to 5% in applications to welfare benefits, and a 1 to 2% reduction in job search intensity.