Was there a 'race to the bottom' after welfare reform?

Leading up to the passage of the 1996 welfare reform, there was much speculation and debate over the possibility that states would \race to the bottom" in setting welfare generosity if given more control over their individual programs. In the fteen years after welfare reform, did such a race to the bottom ensue? Using a spatial dynamic econometric approach, I investigate welfare competition across multiple policy instruments and across three distinct welfare periods -- the AFDC regime, the experimental waiver period leading up to the reform, and the TANF era. Results suggest strategic policy setting occurs over multiple dimensions of welfare including the effective benefit level and the effective tax rate applied to recipient's earned income. Furthermore, strategic behavior appears to have increased over time, consistent with a race to the bottom after welfare reform. However, once controlling for own past policies, little evidence of cross-state strategic policy setting is found for the maximum benefit level.


Welfare Reform

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Sarah Burns


Was there a 'race to the bottom' after welfare reform?