Evidence that the welfare magnet hypothesis is real.

 From Testing the welfare magnet hypothesis from the American Economic Association.

A bedrock truism in economics is that people respond to incentives (whether positive or negative).  More bluntly - "Incentives matter."  

This has been a longstanding question in welfare and in economic migration - do more generous public policies go beyond fixing the known problem and instead create new demand, i.e. people working less or more migrants responding to generous welfare services?  Homelessness and permissive drug treatment programs have similar questions.

Logically the answer is . . . Yes.  That is, however, an unpopular answer in governance circle so there is always motivated research trying to make the case that unlike every other field, in welfare and immigration, people do not respond to changing incentives.

What is being reported here is the empirical data arising a natural experiment in Denmark when immigrant benefits were first cut, then expanded, then cut again.  How did those legislative changes influence resulting immigration?

From The Welfare Magnet Hypothesis: Evidence from an Immigrant Welfare Scheme in Denmark by Ole Agersnap, Amalie Jensen, and Henrik Kleven.  From the Abstract:

We study the effects of welfare generosity on international migration using reforms of immigrant welfare benefits in Denmark. The first reform, implemented in 2002, lowered benefits for non-EU immigrants by about 50 percent, with no changes for natives or EU immigrants. The policy was later repealed and reintroduced. Based on a quasi-experimental research design, we find sizable effects: the benefit reduction reduced the net flow of immigrants by about 5,000 people per year, and the subsequent repeal of the policy reversed the effect almost exactly. The implied elasticity of migration with respect to benefits equals 1.3. This represents some of the first causal evidence on the welfare magnet hypothesis.

 A picture is worth a thousand words but they can be deceptive as well.  In this case, though, the observed data is consistent with the theory which is also consistent with the illustration - There is a welfare magnet hypothesis.