Objectives. Contrary to conventional wisdom, Census data show a substantial local role in providing health, housing, and public welfare services. I evaluate two models to explain local social welfare: an intergovernmental model, based on federal and state funds, and an interjurisdictional model, based on measures of local monopoly power.
Methods. I estimate a panel data model of local redistributive expenditures from 1992–2002 to test between these alternative explanations for local redistribution.
Results. I find that vertical arrangements tend to drive local redistributive spending.
Conclusions. Intergovernmental factors drive local social welfare policy and suppress the local welfare race to the bottom.