Is strategic interaction among governments just a modern phenomenon? Evidence on welfare competition under Britain’s 19th-century Poor Law

Abstract

AbstractDrawing on data from mid-19th century Britain, this paper studies strategic interaction among local governments in the choice of welfare benefits under the Poor Law, the local welfare system of the time. The paper exploits a national reform that reduced the length of residency required for welfare eligibility, which should have increased the incentive for welfare migration and thus led to both stronger strategic interaction and lower levels of equilibrium spending. The results show evidence of a positive but small degree of baseline interaction, suggesting that modern models of welfare competition may apply even in settings with relatively high migration costs. While the change in post-reform equilibrium spending is negative as predicted, the results show no evidence of stronger interaction after the reform.