Theories of federalism supporting the devolution of welfare policy to the states suggest that the removal of national policy controls will allow states to tailor-make welfare policy to fit local needs and preferences. These theories predict that state policymaking under devolution will respond mostly to state-specific factors. Alternative theories of federalism suggest that devolution will increasingly expose states to national and interstate pressure, and that state policymaking will follow primarily national factors. We use data on AFDC waivers granted to states from 1977 through the end of the program in 1996 to test these competing approaches. National factors tend to be more important than state-spcific factors in shaping state welfare innovation, supporting competitive theories of federalism, although welfare innovation, unlike benefit levels, does not seem to be susceptible to the “welfare magnet” phenomenon.
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