Federal welfare spending, state innovation

An interesting paper:

We suggest that increased federal welfare spending increases state government performance in the “new economy” development policy areas by helping states minimize welfare costs and divert more own-source resources into economic development… The authors find that federal welfare spending stimulates state new economy development directly, but also indirectly through its positive impact on both state fiscal comfort and administrative capacity. The findings suggest that federal intergovernmental transfers continue to be an important policy mechanism with spillover effects for state economies.

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