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Does Welfare Policy Affect Residential Choices? Evidence from a Natural Experiment

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Abstract

This paper studies how changes in welfare benefit levels affect welfare recipients' residential choices. Although several empirical studies have stressed that welfare policy may affect residential choices of welfare recipients, few studies have simultaneously taken into account that residential choices of welfare recipients also affect welfare policy. The main contribution of this paper is to address this policy endogeneity by utilizing a policy reform as a natural experiment. The results show that welfare policy exerts a nontrivial effect on residential choices of welfare recipients. Moreover, I show that ignoring the policy endogeneity may give rise to a downward bias in the estimated migration responses.

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  • Jon H. Fiva, 2007. "Does Welfare Policy Affect Residential Choices? Evidence from a Natural Experiment," Discussion Papers 503, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:503
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    File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp503.pdf
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    References listed on IDEAS

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    1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
    2. Revelli, Federico, 2006. "Performance rating and yardstick competition in social service provision," Journal of Public Economics, Elsevier, vol. 90(3), pages 459-475, February.
    3. Phillip B. Levine & David J. Zimmerman, 1999. "An empirical analysis of the welfare magnet debate using the NLSY," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(3), pages 391-409.
    4. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages 672-694, November.
    5. Dahlberg, Matz & Edmark, Karin, 2008. "Is there a "race-to-the-bottom" in the setting of welfare benefit levels? Evidence from a policy intervention," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1193-1209, June.
    6. Terra McKinnish, 2005. "Importing the Poor: Welfare Magnetism and Cross-Border Welfare Migration," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    7. repec:cup:apsrev:v:99:y:2005:i:01:p:125-135_05 is not listed on IDEAS
    8. Fiva, Jon H. & Rattso, Jorn, 2006. "Welfare competition in Norway: Norms and expenditures," European Journal of Political Economy, Elsevier, vol. 22(1), pages 202-222, March.
    9. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    10. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-774, September.
    11. 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.
    12. McKinnish, Terra, 2007. "Welfare-induced migration at state borders: New evidence from micro-data," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 437-450, April.
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    Cited by:

    1. Alejandro Gaviria & Carlos Medina & Jorge Tamayo, 2010. "Assessing the Link between Adolescent Fertility and Urban Crime," BORRADORES DE ECONOMIA 006860, BANCO DE LA REPÚBLICA.
    2. Karin Edmark, 2009. "Migration Effects of Welfare Benefit Reform," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 511-526, September.
    3. Edmark, Karin, 2007. "Effects of work requirements on welfare migration," Working Paper Series 2007:29, IFAU - Institute for Evaluation of Labour Market and Education Policy.

    More about this item

    Keywords

    Welfare Benefits; Migration; Policy Endogeneity;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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