Welfare generosity and location choices among new United States immigrants
Marvin E. Dodson III
Institute for Economic Advancement University of Arkansas at Little Rock 2801 S. University Avenue Little Rock, AR 72204-1099
Abstract
This paper extends the limited research that investigates the determinants of location choices among new United States immigrants. Unlike previous work, this study employs data that includes
country of birth, major categories of admission, and state of intended residence for each new immigrant. Additionally, due to censoring concerns in immigration data this study uses a Tobit
estimation technique. The results suggest significant correlation between immigrant inflow and welfare generosity. Furthermore, the welfare motivation seems to be equally pervasive in every major
category of admission among new immigrants. © 2001 Elsevier Science Inc. All rights reserved.
1. Introduction
A back and forth legislative battle has developed over immigrant eligibility in public assistance programs in the recent past. The Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 P.L. 104-193 PRWORA tightened eligibility requirements for both immigrants and natives in most income assistance programs. Under this legislation, most immigrants were
barred from federal income assistance programs for the first five years of residence. Further, individual states were given the power to determine eligibility beyond this exclusionary period.
Recent reversals of these requirements have proceeded rather covertly. The Agricultural Research, Extension and Education Reform Act of 1998 P.L. 105-185
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readmitted 250,000
I would like to thank Clifford Hawley, Brian Cushing, Stratford Douglas, George Hammond, Sudeshna Bandyopadhyay, Thomas Garrett, Victor Claar, Gary Wagner, and Mark Kepple for helpful comments. Also two
anonymous referees provided suggestions which improved this paper.
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7 U.S.C. § 2014, § 2015f. International Review of Law and Economics 21 2001 47– 67
0144-818801 – see front matter © 2001 Elsevier Science Inc. All rights reserved. PII: S 0 1 4 4 - 8 1 8 8 0 0 0 0 0 4 0 - 5
legal immigrants to the food stamp program who were excluded under the 1996 law. The Balanced Budget Act of 1997 restored 11.5 billion in supplemental security income benefits
to similarly excluded legal immigrants. The courts have also set the outer bounds on state power with regard to PRWORA. The United States Supreme Court struck down attempts by
California to limit welfare payments to new residents in the case of Saenz v. Roe.
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California’s policy targeted all new state residents, whether native or immigrant. Fourteen other states had similar laws.
Although PROWRA allows states to push most new legal immigrants off the welfare rolls, most have not.
3
Not only have these states maintained TANF
4
payments to immigrants out of state budgets but most are or are expected to incorporate immigrants who arrived after the
reform date once their exclusionary period ends. No doubt, this generosity is due in large part to the current economic expansion. When state tax revenues become more scarce, states will
inevitably revisit the issue of immigrant participation in public assistance programs.
Federal guidelines identify four major categories of immigrant admissions. They are imme- diate relatives of U.S. citizens, family-sponsored immigrants, employment-based immigrants,
and refugees and asylees. Eligibility criteria for assistance among these groups differ slightly.
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For example, Amerasian, Cuban, and Haitian immigrants regardless of admission category are exempt from most PROWRA restrictions. Refugees and asylees also face less stringent eligibility
requirements. While these exceptions exist, as a whole all permanent legal residents were eligible for welfare in the same manner as citizens prior to PROWRA. Consequently, the new restrictions
in PROWRA are fairly uniform across all immigrant categories.
Several studies have attempted to measure the use of transfer payments by immigrants. Borjas and Hilton 1996 are the most cited example. In their results, an immigrant house-
hold’s probability of receiving any type of assistance was 26.1 percent in the 1990-91 period while the native probability was 16.3 percent. Further, the average number of months that an
immigrant remained on welfare was 9.5 while natives collected benefits for only 7.8 months.
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The important distinction illuminated in this study is the difference in participation rates between cash and non-cash benefit programs. While immigrants and natives appear similar
in their usage of cash programs, their usage diverges when programs such as Medicaid, food stamps, and housing allowances are considered.
Interestingly, Baker and Benjamin 1993 find the opposite result for recent immigrants to Canada. Buckley 1996 argues this result is due to a more effective screening process in
Canada that emphasizes marketable skills.
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McCarthy and Vernez 1997 find that immigrant participation in California’s welfare programs is slightly less than that found by Borjas and
2
Saenz v. Roe, 119 S.Ct. 1518, 143 L.Ed.2d 689, 67 USLW 4291 1999.
3
See “Welfare Reform–Implications of Proposals on Legal Immigrants’ Benefits,” GAOHEHS-98-132, July 1998 for a discussion of the legislation that altered eligibility requirements for immigrants and the response of
states to these changes.
4
Temporary Assistance to Needy Families TANF replaced Aid to Families with Dependent Children AFDC as a result of PROWRA.
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See the GAO report cited above for details on the requirements.
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Borjas and Hilton 1996, pages 580 and 588.
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Also see Borjas 1994 for more on this argument. 48
M. E. Dodson III International Review of Law and Economics 21 2001 47– 67
Hilton. Hu 1996 maintains that increased welfare participation among immigrants is concentrated among the elderly. He finds that new immigrants arriving after age fifty-five are
more likely to enter assistance programs than similar natives and younger immigrants. Much work has been done on migration within the United States. Examples include
Greenwood 1975, Graves and Linneman 1979, Graves and Knapp 1988, and Dresher 1994. In these models migration depends upon the public and private economic cost and
benefits associated with relocation. More recently Conway and Houtenville 1998, 1998b, 1998c find that the elderly population is attracted to states whose tax and expenditure
policies treat them favorably. Blank 1988 inspects the movement patterns of low income female headed households. She finds that these households are more likely to leave low
welfare payment and low wage areas. Gramlich and Laren 1984 find that households in general who are moving are more likely to locate in a state that has higher AFDC benefits.
Dunlevy 1991 researches the immigrant population. He shows that the new immigrant population in a state is positively related to the state’s immigrant stock. He does not consider
welfare generosity. Bartel 1989 supports Dunlevy’s results by finding that the stock of similarly born immigrants is the major incentive in immigrant location decisions.
Buckley 1996 investigates the determinants of location for new U.S. immigrants according to their admission category and state of intended residence, using a panel for the years 1985 to
1991. His data does not allow for disaggregation of the dependent variable according to nativity or place of birth. Therefore, he uses the percent of the state’s population that is foreign born,
regardless of nativity, as an independent variable. The results suggest that there is significant welfare motivation in immigrant location choices. In addition, his results imply that less gener-
osity in welfare payments will not only reduce total immigration, but raise the skill level of the immigrant inflow since employment-based immigrants are less responsive to welfare.
Zavodny 1997, 1998 examines the determinants of immigrant locations in a panel for fiscal years 1982 and 1992. The dependent variable is the total number of immigrants from
individual countries to individual states. She does not consider differences across admission categories. According to Zavodny 1997, the presence of immigrants from the same country
of birth is the determining factor in location choices and that welfare generosity plays no part. She concludes that Buckley’s 1996 welfare motivation results are biased upwards because
he uses the total foreign-born population and not the population according to country of birth as an independent variable. In a more recent study, Borjas 1999 finds that immigrants do
cluster in states with higher welfare payments. In fact, he finds that the distribution of immigrants among the states is statistically different from the distribution of relocating
natives. Furthermore, welfare generosity appears to be a good predictor of this distribution.
2. A new model of immigrant location choice
