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Income inequality and the growth of redistributive spending in the United States (US) states: is there a link?

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  • Moldogaziev, Tima T.
  • Monogan, James E.
  • Witko, Christopher

Abstract

Prominent public policy models have hypothesised that rising income inequality will lead to more redistributive spending. Subsequent theoretical advancements and empirical research often failed to find a positive relationship between inequality and redistributive spending, however. Over the last few decades both income inequality and redistributive spending have been growing in the United States states. In this work, we consider whether temporal variation in inequality can explain variation in redistributive spending, while controlling for a number of factors that covary with redistributive spending in the states. In an analysis of data for 1976–2008, we find that higher levels of inequality are associated with greater redistributive spending, offering empirical evidence that fiscal policy at the state level responds to growing levels of income inequality. Considering the growing role of state governments in welfare provision during the past several decades, this finding is relevant for policy researchers and practitioners at all levels of government.

Suggested Citation

  • Moldogaziev, Tima T. & Monogan, James E. & Witko, Christopher, 2018. "Income inequality and the growth of redistributive spending in the United States (US) states: is there a link?," Journal of Public Policy, Cambridge University Press, vol. 38(2), pages 141-163, June.
    • Handle: RePEc:cup:jnlpup:v:38:y:2018:i:02:p:141-163_00
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    Cited by:

    1. Hyunwoo Kim, 2023. "The microfoundation of macroeconomic populism: The effects of economic inequality on public inflation aversion," Economics and Politics, Wiley Blackwell, vol. 35(1), pages 65-96, March.
    2. Durongkaveroj, Wannaphong, 2022. "Structural Transformation, Income Inequality and Government Expenditure: Evidence from International Panel Data," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 29-44.
    3. Ismail M. Cole, 2023. "The political economy triangle of government spending, interest‐group influence, and income inequality: Evidence and implications from the US states," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 1122-1176, November.

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