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

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Author Info
Smith, Mark W

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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.

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File URL: http://mpra.ub.uni-muenchen.de/10125/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10125.

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Date of creation: May 1999
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Handle: RePEc:pra:mprapa:10125

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Related research
Keywords: income support United States welfare benefits Temporary Assistance to Needy Families Aid to Families with Dependent Children spatial spillovers

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Health, Education, and Welfare
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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  1. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law & Economics, University of Chicago Press, vol. 23(2), pages 209-87, October.
    Other versions:
  2. Smith, Patricia K, 1991. " An Empirical Investigation of Interstate AFDC Benefit Competition," Public Choice, Springer, vol. 68(1-3), pages 217-33, January.
  3. 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. [Downloadable!] (restricted)
    Other versions:
  4. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, vol. 66(3), pages 359-71, June. [Downloadable!] (restricted)
  5. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August. [Downloadable!] (restricted)
  6. Blank, Rebecca M., 1985. "The impact of state economic differentials on household welfare and labor force behavior," Journal of Public Economics, Elsevier, vol. 28(1), pages 25-58, October. [Downloadable!] (restricted)
  7. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July. [Downloadable!] (restricted)
  8. Blank, Rebecca M., 1988. "The effect of welfare and wage levels on the location decisions of female-headed households," Journal of Urban Economics, Elsevier, vol. 24(2), pages 186-211, September. [Downloadable!] (restricted)
  9. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May. [Downloadable!] (restricted)
  10. Plotnick, Robert D, 1986. "An Interest Group Model of Direct Income Redistribution," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 594-602, November. [Downloadable!] (restricted)
  11. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August. [Downloadable!] (restricted)
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