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Inhibiting Institutional Inertia: Squaring Iron Triangles while Reforming Welfare

PFM, Vol. 8 No. 2, (2008)

The enduring slogan preceding the passage of the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was “to end welfare as we know it.” Common political wisdom is that, measured in caseload numbers and by welfare-to-work efforts, the reform was an unmitigated success. This paper takes a look into what Blank (2002) calls the “black box” of policy adjustments at the level of the welfare managers and the frontline bureaucracy. An analysis of their incentive structure reveals explanations of how the institutional resistance to change was defused. It also implies a specific policy toolbox for situations in which the reduction of the bureaucracy itself is part of the objective of welfare reform. A combination of block-grants, devolution to the smallest feasible structural level and vigorous competition by private sector providers would ensure a higher likelihood of success under this scenario.

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