Government Decision-Making and the Incidence of Federal Mandates
Harvard University - Department of Health Policy & Management; National Bureau of Economic Research (NBER)
This paper analyzes the effects of federally-mandated program changes on state spending and revenues, incorporating and evaluating the predictive value of several common theories of the state decision-making process. Using several sources of exogenous increases in public medical spending, I estimate that the entire state portion of the burden of mandated spending is borne by decreases in other public welfare spending. While federal mandates may influence the composition of benefits at the state level, it is much more difficult for them to change the total level of state transfers. Comparison of state reactions to different shocks suggests that these reductions are due in part to the substitutability of programs in the voter utility function but also in part to the "stickiness" of spending within budget categories. States with greater racial differences between recipients and voters and states with less generous neighbors reduce other public welfare spending by even more, alleviating the burden the medical expansions imposed on their taxpayers. Mandates may thus serve only in to increase inequality across states.
Number of Pages in PDF File: 60
Keywords: fiscal federalism, Medicaid, social insurance, spillovers
JEL Classification: H7, I0, H0working papers series
Date posted: November 2, 2001
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.328 seconds