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State Government Cash and In-kind Benefits: Intergovernmental Fiscal Transfers and Cross-Program Substitution

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  • James Marton

    (Martin School of Public Policy and Administration, University of Kentucky)

  • David E. Wildasin

    ()
    (Martin School of Public Policy and Administration and Department of Economics, University of Kentucky)

Abstract

US states provide both cash and health insurance benefits for the poor, partially financed by fiscal transfers from the Federal government. The 1996 welfare reform drastically reduces Federal support for cash transfers at the margin, lowering the relative price to states of providing benefits to the poor through Medicaid. This paper analyzes the comparative-statics response of state governments to such changes in intergovernmental transfers, showing (in central cases) that they can contribute not only to reductions in state expenditures on cash benefits but to increases in expenditures on Medicaid, whether or not beneficiary populations are mobile among states. Length: 27 pages

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Bibliographic Info

Paper provided by University of Kentucky, Institute for Federalism and Intergovernmental Relations in its series Working Papers with number 2006-01.

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Date of creation: Jan 2006
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Handle: RePEc:ifr:wpaper:2006-01

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Keywords: Intergovernmental Transfers; Welfare Reform; Medicaid;

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References

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  1. Howard Chernick, 1998. "Fiscal Effects of Block Grants for the Needy: An Interpretation of the Evidence," International Tax and Public Finance, Springer, vol. 5(2), pages 205-233, May.
  2. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  4. Elizabeth T. Powers, 2000. "Block Granting Welfare: Fiscal Impact on the States," Economic Development Quarterly, , vol. 14(4), pages 323-339, November.
  5. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  6. Robert Moffitt, 1988. "Has State Redistribution Policy Grown More Conservative?," NBER Working Papers 2516, National Bureau of Economic Research, Inc.
  7. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
  8. Brown, Charles C. & Oates, Wallace E., 1987. "Assistance to the poor in a federal system," Journal of Public Economics, Elsevier, vol. 32(3), pages 307-330, April.
  9. Baicker, Katherine, 2001. "Government decision-making and the incidence of federal mandates," Journal of Public Economics, Elsevier, vol. 82(2), pages 147-194, November.
  10. Robert A. Moffitt, 2003. "Means-Tested Transfer Programs in the United States," NBER Books, National Bureau of Economic Research, Inc, number moff03-1.
  11. repec:cup:jechis:v:44:y:1984:i:01:p:139-159_03 is not listed on IDEAS
  12. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
  13. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, M.E. Sharpe, Inc., vol. 47(4), pages 6-16, July.
  14. Bahl, Roy & Martinez-Vazquez, Jorge & Wallace, Sally, 2002. "State and Local Government Choices in Fiscal Redistribution," National Tax Journal, National Tax Association, vol. 55(4), pages 723-42, December.
  15. Chernick, Howard, 2000. "Federal Grants and Social Welfare Spending: Do State Responses Matter?," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 143-52, March.
  16. David C. Ribar & Mark O. Wilhelm, 1999. "The Demand for Welfare Generosity," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 96-108, February.
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Cited by:
  1. David Wildasin, 2007. "Pre-Emption: Federal Statutory Intervention in State Taxation," Working Papers 2007-05, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
  2. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," Working Papers 0702, University of Guelph, Department of Economics and Finance.
  3. James Marton, 2007. "The impact of the introduction of premiums into a SCHIP program," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(2), pages 237-255.
  4. Robin Boadway & Jean-Francois Tremblay, 2005. "A Theory of Vertical Fiscal Imbalance," Working Papers 2006-04, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
  5. J. Amegashie & Bazoumana Ouattara & Eric Strobl, 2013. "Moral hazard and the composition of transfers: theory and evidence from cross-border transfers," Economics of Governance, Springer, vol. 14(3), pages 279-301, August.
  6. Christos Kotsogiannis & Robert Schwager, 2006. "Fiscal Equalization and Yardstick Competition," Working Papers 2006-15, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
  7. Hikaru Ogawa & David E. Wildasin, 2009. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," American Economic Review, American Economic Association, vol. 99(4), pages 1206-17, September.
  8. Claire de Oliveira, 2009. "Good Health to All: Reducing Health Inequalities among Children in High- and Low-Income Canadian Families," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 288, May.

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