The Law and Economics of Federalism
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The Law and Economics of Federalism

Edited by Jonathan Klick

This unique volume takes a primarily empirical perspective on the law and economics of federalism. Using cross jurisdiction variation, the specially commissioned chapters examine the effects of various state experiments in areas such as crime, welfare, consumer protection, and a host of other areas. Although legal scholars have talked about states as laboratories for decades, rarely has the law and economics literature treated the topic of federalism empirically in such a systematic and useful way.
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Chapter 5: Uncontrolled experiments from the laboratories of democracy: traditional cash welfare, federalism, and welfare reform

Jonah B. Gelbach

Abstract

In this chapter I discuss the history and basic incentive effects of two key U.S. cash assistance programs aimed at families with children. Starting roughly in the 1980s, critics of the Aid to Families with Dependent Children (AFDC) program argued that that program – designed largely to cut relatively small checks – failed to end poverty or promote work. After years of federally provided waivers that allowed states to experiment with changes to their AFDC programs, the critics in 1996 won the outright elimination of AFDC. It was replaced by the Temporary Assistance to Needy Families (TANF) program, over which states have enormous design discretion. In this chapter I argue that the empirical evidence on AFDC’s behavioral impact was never as compelling as AFDC’s critics maintained. Nor, for the period up to about 2012 (the endpoint of this chapter's analysis), is there any substantial empirical evidence supporting what I call the “triumphalist” position that the wave of state and federal welfare reforms that took place in the 1990s importantly explains the observed increase in employment among single mothers. Either the economic boom of the late 1990s, or some other difficult-to-measure change, appears to have played a more important role than welfare reform. What is more, the uncontrolled experimentation of the last two decades has left the U.S. with a crazyquilt collection of state programs that do not lend themselves to the kind of empirical research that would be necessary to benefit from the Brandeisian idea of states as laboratories of democracy.

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