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 fifteen 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.

Document Type

Research Paper

Publication Date


Discussion Paper Number

DP 2012-04