Abstract
ABSTRACT This paper investigates whether the expenditure ratio (measured as total spending divided by total revenues) of a state in the U.S. is correlated with the inequality level of that state. Although the federal government spends on both welfare and non-welfare programs, state government expenditures mostly go to welfare programs. As a result, a given state with a greater expenditure ratio should have a lower level of inequality compared to the inequality levels of other states. Also, should a state’s expenditure ratio for a given year increase compared to those for other years, the state should have a lower level of inequality. An empirical test of this hypothesized association employs the data of fifty states covering the years 1980 to 2014. We find a strong negative impact of a given state’s expenditure ratio on its inequality level (measured by the Gini coefficient). In a random effects model, a one standard deviation increase in state expenditures ratio would result in approximately .15% less inequality.
Published Version
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