Explaining State-Level Variations In Levels And Change In The Distribution Of Income In The United States, 1978-1990

Abstract

Income concentrations increased markedly in the United States during the period since 1980. Income concentrations occurred within states at differing levels and rates. We estimate models that explain variations in levels of income concentration among states in 1980 and 1990 and of changes in state-level income concentration during the period 1978 to 1990. We test for the effects of state and national government redistributive policies along with a number of states’ economic, demographic, and political characteristics linked to income distribution in previous research. Results show state-borne redistributive policies have little influence on income concentration. Where state policies do affect income concentration, more generous welfare programs have the unexpected effect of coinciding with increases in income concentration. Higher cash transfers are associated with increased income inequality. Only the establishment of payment standards comparable to the retail wage, a welfare policy enacted by a few states, is associated with reduced income inequality.