Title

Economic Growth and Redistribution: Friends or Foes?

Document Type

Presentation

Presentation Date

Fall 9-23-2011

Conference Name

Southeastern Conference for Public Administration (SECoPA)

Conference Location

New Orleans, Louisiana, USA

Abstract

The equity-efficiency trade off has been one of key issues in welfare economics. A number of studies have been explored to delve into the relationship precisely to initiate better economic policy. In particular, the relationship between economic growth and redistribution has been theorized and empirically tested in many studies (Burtless 2003; Ashby and Sobel 2007; Frank 2009). Kuznets (1955) theorizes a bell-shaped relationship between economic prosperity and income inequality that assumes a negative relationship between the two in poor countries while a positive association in developed countries. Okun (1975) claims a strict inverse relationship indicating that efficiency sacrifices equity or the opposite. On the other hand, some political economy models predict a positive relationship between economic growth and social welfare using median voter theorem and social movement theory (Perotti 1993; Saint-Paul & Verdier 1991; Alesina and Perotti 1993). The results of empirical analyses provide inconsistent outcomes. The relationship between the two seems to be sensitive to the measurement of an income inequality (Frank 2008). This study seeks to discuss American states’ policy efforts on economic development and social welfare and investigate how states allocate their resources between the two. In addition, this study will draw some policy implications by comparing American states’ economic growth rates and an income distribution.

Disciplines

Public Affairs, Public Policy and Public Administration

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