This study uses data from the 1990, 1992, 1993, and 1996 panels of the Survey of Income and Program Participation to examine how welfare policies and local economic conditions contribute to women’s transitions into and out of female headship and into and out of welfare participation. It also examines whether welfare participation is directly associated with longer spells of headship. The study employs a simultaneous hazards approach that accounts for unobserved heterogeneity in all of its transition models and for the endogeneity of welfare participation in its headship model. The estimation results indicate that welfare participation significantly reduces the chances of leaving female headship. The estimates also reveal that more generous welfare benefits contribute indirectly to headship by increasing the chances that mothers will enter welfare. More generous Earned Income Tax Credit benefits are associated with longer spells of headship, nonheadship, and welfare participation and nonparticipation. Other measures of welfare policies, including indicators for the adoption of welfare waivers and the implementation of Temporary Assistance for Needy Families programs, are generally not significantly associated with headship or welfare receipt. Better economic opportunities are estimated to increase headship but reduce welfare participation among unmarried mothers.