Can migration lead to the de facto merging of rich and poor communities: A special application to the provision of Medicaid

The issue of public assistance programs for the poor in federal systems has long been a subject of debate for many reasons. One important reason for the study of such programs is that the pattern of human migration between jurisdictions is in part determined by cross community differences in the quantity of local public goods provided as well as differences in the tax-price of those goods. Although the federal government in part controls such programs, the states have the ability to vary the level and types of assistance. Therefore, the choice of level and type of service of each individual state can have a significant effect on the location choice of household decision-makers. This thesis investigates whether the fiscally induced in-migration of the Poor to Rich communities can bring about the de facto merger of the two communities. The theoretical framework that underlies the thesis is that of the Atkinson-Stiglitz Model. This model of public goods provision allows for communities of different levels of affluence and heterogeneous preferences based on market endowment. For the purposes of this study the public good is Medicaid and the communities are the forty-eight contiguous United States and Washington, D.C. Data from the Bureau of the Census and the Health Care Financing Administration are used to perform Conditional (fixed-effect) Logit estimations for location choice. The results indicate that the level of Medicaid is a significant positive factor in the in-migration decision of the low-income female heads of household. Additionally, these women are attracted to more affluent communities.