Semester

Spring

Date of Graduation

2011

Document Type

Dissertation

Degree Type

PhD

College

Chambers College of Business and Economics

Department

Economics

Committee Chair

Russell Sobel.

Abstract

This dissertation addresses issues related to the effectiveness and consequences of state and local spending in the United States. Chapter two examines how merit-based aid tuition assistance contributes to the retention of graduates in a state. An analysis of restricted-use administrative data for West Virginia graduates suggests that in-state college graduates that received merit-based aid to attend college are no more likely to work in the state after graduation, compared to those who did not received the assistance. These graduates are between 1.9 and 5.2 percentage points less likely to remain in the state, decreasing the overall effect of merit-based assistance on the retention of human capital. In chapter three I calculate the implicit marginal tax rates for individuals that participate in multiple welfare programs and use them to examine the extent to which it may affect labor force participation of welfare recipients after the reform of 1996. The analysis supports the hypothesis that high implicit marginal tax rates discourages workers from looking for work and becoming self-sufficient. On average, a standard-deviation increase in these rates lowers the work participation rates of TANF recipients by 0.208 standard deviations, or 8.5 percent. Chapter four looks at the consequences of state welfare spending across the border. In it, I use data from 1987 to 2007 and find that the interaction of state governments does depend on the political environment of each state. Single party majority governments do not react to neighboring states' welfare spending while divided governments do. Also, fiscal policy reactions among states appear to depend on what political party holds the majority. Finally, the analysis suggests that the welfare reform of 1996 did change the way in which these governments reacted to one another, which can be mainly attributed to the change from a matching-grant to a block-grant system. An initial examination of the data suggests that the surge in Republican elected officials after the reform may have also played a role in the way state governments interact.

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