American Federalism, Welfare Policy, and Residential Choices

Abstract

The relationship between welfare benefit levels and the residential choices of the poor raises two issues for federalism in the United States. Do state benefit levels affect the residential choices of the poor? Do residential choices of the poor affect the level at which a state sets its benefit levels? Empirical studies have seldom studied the interconnection between these two issues. This research estimates simultaneously the mutual effects of welfare benefits and poverty rates while controlling for other economic and political variables. When benefit levels become high, the size of the poverty population increases. Conversely, when poverty rates become high, benefit levels are cut. The findings are consistent with the claim that state-determined benefit levels distort policy and residential choices.