Welfare policies and Residential choices in Norway : A review of theoretical and empirical investigations

Abstract

Studies have shown that, higher welfare benefits in some local jurisdictions compared to others have a great impact on welfare migrations. And as a result it leads to a race to the bottom outcome in setting preferred levels of welfare benefits by local jurisdictions. To address this phenomenon most countries introduced welfare reforms. The introduction of the national guideline welfare norm in Norway led to the race to the bottom outcome in setting preferred levels of welfare benefits by local governments. This thesis evaluates the evidence of race to the bottom outcome triggered by the implementation of the national guideline welfare norm. Furthermore it investigates whether local authorities in Norway set their welfare benefits levels based on that of neighboring local authorities. These objectives were accomplished by undertaking a pre- and post-reform evaluation of the welfare benefits levels offered by municipalities in Norway. The study was based on secondary data on welfare benefits. Data on welfare benefits before the reform was derived from the study of Fiva (2009) while the post-reform data was derived from Statistics Norway (SSB) database on welfare benefit norms that different municipalities in Norway offered after the welfare reform was introduced. The main argument was that if many local governments responded by offering welfare benefits levels closer or just equal to the national guideline welfare norm it implies quite significant result of a model with welfare migration. With welfare migration, policymakers of different local authorities are influenced to observe the levels of welfare benefits being offered by neighboring local authorities. This leads to strategic interactions among local jurisdictions. The utmost credible foundation of such strategic interaction is influenced by a great concern about welfare migration. Large differences between welfare benefit norms have a huge effect on mobility of welfare recipients across local jurisdictions.