2014/11/28 by Megan E. Hatch, Elizabeth Rigby · 2 citations
Social Sciences · Economics, Econometrics and Finance · #Income, Poverty, and Inequality #Fiscal Policy and Economic Growth #Gender, Labor, and Family Dynamics
paper · doi:10.1111/psj.12094
openalex publication_date 2014/11/28 · openalex created_date 2016/06/24 · openalex updated_date 2026/08/01
Prior literature has emphasized demographic, economic, and political explanations for increasing income inequality in the U nited S tates, with little attention paid to the role of state‐level policy. This is despite great variation across states in both the level of inequality and the rate at which it is rising. This paper asks whether differences in state policy choices can help explain this variation; specifically, we examined a range of state redistributive policies enacted between 1980 and 2005 and identified four common approaches likely to impact inequality: taxes on the wealthy, taxes on the poor, spending on the poor, and labor market policies. We used pooled cross‐sectional time‐series data and a fixed‐effects model to assess the relationship between states’ use of each policy approach and two measures of market income inequality: the Gini coefficient and the income share of the top 1 percent. We find policies played a significant role in shaping income inequality in the states. For three of these four policy approaches, we found less inequality following expansions of state redistributive policy. Yet, for another, we identified the opposite pattern. These findings highlight the importance of state policy choices in shaping market inequality, and have implications for designing state policies to reduce income inequality since the success of these efforts depends on the policy approach used to redistribute income and wealth.