Should we expect a race to the bottom in welfare benefits? Evidence from a multistate panel, 1979-1995

Smith, Mark W (1999): Should we expect a race to the bottom in welfare benefits? Evidence from a multistate panel, 1979-1995.

Abstract

Evidence exists that welfare recipients migrate between states to seek more generous benefits, potentially leading states to lower AFDC benefits to avoid such welfare migration. Taken further, this raises the specter of states competitively lowering benefits in reaction to similar moves by other states. The naïve model of policymaking assumes that benefits are solely a function of state characteristics. If benefits depend on the threat of welfare migration or other interstate competition, however, one must account for possible spillovers. This paper presents tests for the presence of welfare-policy spillovers in a panel of 47 states over the period 1979-1995. I find weak evidence of spillovers even in the presence of state fixed effects and political and budgetary-control variables.

• Item Type: MPRA Paper
• Language: English
• Keywords: income support; United States; welfare benefits; Temporary Assistance to Needy Families; Aid to Families with Dependent Children; spatial spillovers
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H75 - State and Local Government: Health ; Education ; Welfare ; Public Pensions; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I38 - Government Policy ; Provision and Effects of Welfare Programs; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H73 - Interjurisdictional Differentials and Their Effects

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