Is there a race-to-the-bottom in the setting of welfare benefit levels? Evidence from a policy intervention

• 成果类型: Article
• 署名作者: Dahlberg, Matz; Edmark, Karin
• 署名单位: Uppsala University; Leibniz Association; Ifo Institut
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2007.12.001
• 发表日期: 2008
• 页码: 1193-1209
• 关键词: welfare benefit level; strategic interactions; race-to-the-bottom; policy intervention

摘要

In this paper we investigate whether local governments react on the welfare benefit levels in neighboring jurisdictions when setting their own benefit levels. We solve the simultaneity problem arising from the welfare game by utilizing a policy intervention; more specifically, we use a centrally geared exogenous placement of a highly welfare prone group (refugees) among Swedish municipalities as an instrument. The IV estimates indicate that there exists a race-to-the-bottom and that the effect is economically as well as statistically significant; if the neighboring municipalities decrease their welfare benefit level by 100 SEK, a municipality decreases its benefit level with approximately 41 SEK. This result is robust to several alternative model specifications. (C) 2007 Elsevier B.V. All rights reserved.