Welfare Programs in the Rent-Seeking Society

Over the last 15 years, the interest-group theory of government behavior has shown itself to be an empirically rich and powerful explanatory tool. An attempt is made to test one possible interest-group byproduct hypothesis of the welfare system -- that public assistance represents a form of entry barrier into the workforce that is actively pursued by labor unions so as to generate monopoly rent flows to their members. The chief concern is with the problem of explaining variations across states in levels of payments in an already established welfare system. Empirical tests are conducted based on a model of Aid to Families with Dependent Children (AFDC) payment levels across states. There are 2 major results: 1. The level of AFDC payments is highly correlated with the relative political influence of organized labor. 2. Welfare is not a reward to the poor as an active lobbying interest group.