Public Employment, Welfare Transfers, and Economic Well-Being across Local Populations: Does a Lean and Mean Government Benefit the Masses?

Abstract

This study examines state provisioning of social welfare and employment and its consequences for local economic well-being. Do a larger public sector and more generous social welfare transfers help or harm local populations? To address this question, we derive hypotheses from two competing social policy schools, neoliberal and radical political economy. We assess how claims from both schools operate on the ground, through an empirical test using data for county populations for Keynesian (1970–80) and post-Keynesian (1980–90) decades. Findings do not support neoliberal views that a leaner and meaner government benefits U.S. populations. Rather, economic well-being of the population at large declines where social programs are less generous to poor residents. In both Keynesian and post-Keynesian periods, the state remains important in reducing income inequality and, to some degree, in promoting income growth. Finally, we find important differences within public employment, with state and local government having less beneficial effects.