Means-tested Programs and Interstate Migration in the U.S.

Abstract

This paper quantifies the impact of Medicaid and Rent Assistance on the interstate mobility of their beneficiaries using a structural model with heterogeneous workers and locations. Simulations from the model show that beneficiaries’ mobility decreases by 2.92%, with the greatest reduction at the bottom of the income distribution. Nearly 75% of the negative effect stems from the lack of federal coordination in the programs’ administrations, i.e., the possibility that a moving beneficiary loses transfers despite being eligible for them. Reducing this probability to zero would generate welfare gains of nearly 3% ($22,033) of lifetime consumption for recipients reacting to the reform.