Spending on Social Welfare Programs in Rich and Poor States. Final Report.. f. Need Effects

07/01/2004

When we repeated the regressions separately by quartile, poverty continued to exert consistently negative signs only for the richest states (Quartile 1) and generally had more positive signs for the other quartiles. However, the only statistically significant and positive effects of the poverty variable occurred for cash assistance in quartiles 2 and 3.

The effect of unemployment per capita on the various categories of social welfare spending was positive and statistically significant generally only for the richer states (Quartiles 1 and 2), although an exception is cash assistance in Quartile 3. For the richer states, the unemployment effects were positive and statistically significant for cash assistance and Medicaid in Quartile 1 and for cash assistance and public hospitals in Quartile 2.

The strongest unemployment effect occurred in the cash assistance category for which we observed statistically significant and positive effects for Quartiles 1, 2, and 3. This result might constitute a kind of "caseload effect," but it does not occur in Quartile 4, perhaps because the spending levels are so low they decline no further with lower unemployment.27 But the spending for Quartile 4 apparently also declines no further as unemployment increases. Instead, the spending levels seem "stuck" and independent of the state of the economy.

The effects of population density seem mixed with positive and statistically significant signs on the effects for cash assistance for all quartiles and statistically significant and negative signs on the effects for the remaining categories of social welfare spending, including public hospitals in the richer states (Quartiles 1 and 2). The results were more mixed for Quartiles 3 and 4 with no particular pattern discernable.

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