Constraining Federalism : Formalizing Expectations About Redistributive Policies in Decentralized Systems

Whether states keep welfare benefits low in order to prevent in-migration of benefit-seeking individuals is one of the great questions in the study of federalism. Assessing this question is challenging, however, because it is difficult to specify exactly what constitutes evidence that states inhibit their spending for this reason. This article develops a model which provides a micro-founded framework for thinking about the issue. The model suggests that competition on redistributive programs does not induce “racing” among states, but does constrain spending to be less than what the states would spend if migration were not a concern. The model also provides specific guidance for the form of this downward pressure