Abstract
Drawing on data from mid-19th century Britain, this paper studies strategic interaction among local governments in the choice of welfare benefits under the Poor Law, the local welfare system of the time. The paper exploits a national reform that reduced the length of residency required for welfare eligibility, which should have increased the incentive for welfare migration and thus led to both stronger strategic interaction and lower levels of equilibrium spending. The results show evidence of a positive but small degree of baseline interaction, suggesting that modern models of welfare competition may apply even in settings with relatively high migration costs. While the change in post-reform equilibrium spending is negative as predicted, the results show no evidence of stronger interaction after the reform.
Highlights
A large literature has emerged studying strategic interaction among governments
Relying on data from mid-19th century Britain, the paper focuses on the choice of welfare benefits by British districts under the New Poor Law, the welfare system of the time
The welfare system known as the Old Poor Law was established in England and Wales by the Poor Relief Act of 1601, which created a right to relief at the national level that was implemented locally, with relief funds raised and distributed at the parish level
Summary
A large literature has emerged studying strategic interaction among governments. The literature includes many theoretical papers, most of which focus on tax competition as a source of strategic interaction (see Wilson, 1999 for a survey). While most empirical studies focus on tax rates, a smaller group investigates strategic interaction in spending levels Within this latter set, a handful of papers looks for strategic interaction in the choice of welfare-benefit levels for poor households. Given the exhaustive overall body of empirical work on strategic interaction, any new paper faces a high hurdle in justifying its existence Such a paper, whether its focus is on tax rates, welfare benefits, or some other policy variable, should offer a distinct methodological advancement, or other unique features not found in the previous literature. Relying on data from mid-19th century Britain, the paper focuses on the choice of welfare benefits by British districts under the New Poor Law, the welfare system of the time Under this system, applicants were eligible for assistance partly on the basis of the length of their residency, a requirement that was made less stringent during the sample period.
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