Importing the Poor : Welfare Magnetism and Cross-Border Welfare Migration

I test for welfare-induced migration by comparing AFDC participation in border counties to interior counties in the same state. I assume that migration costs are lower for border county residents. If so, then at a state border with a large cross-border benefit differential, the border counties on the high-benefit side should have higher welfare participation relative to the interior counties of the high-benefit state, having disproportionately attracted welfare migrants. Likewise, the border counties on the low-benefit side should have lower welfare participation relative to the interior counties of the low-benefit state, having disproportionately lost welfare migrants. This suggests that a simple differences-in-differences comparison of welfare participation at state borders to state interiors across high and low benefit states can be used to test for welfare migration. The results obtained using county-level data from 1970-90 indicate that having a neighbor with benefits that are $100 lower increases AFDC expenditures in border counties by 4.0-6.8 percent relative to interior counties