Income Inequality and Economic Development Incentives in US States: Robin Hood in Reverse?

Abstract

This paper explores the relationship between the rising use of economic development incentives (EDI) and rising income inequality within U.S. states. It extends the few papers which investigate state and local income inequality outcomes in the U.S. (Goetz et al., 2011;Shuai, 2015) in three important ways. First, it provides a normative argument for reducing inequality as a policy goal, an issue commonly ignored in empirical applications of inequality. Second, it discusses the channels through which EDI policy can influence equality outcomes in a regional context. Finally, it estimates panel data models for 41 states from 2000 to 2009 using direct measures of EDI and three common measures of income inequality: Gini, top 1 percent income share and top 10 percent income share. The results reveal positive and statistically significant relationships between the one-year lag of EDI values and the three inequality measures. Taken as a whole, the results are consistent with a reverse-Robin-Hood effect where more generous EDI use is associated with redistribution of income from the bottom 90 percent to the top 10 percent of the income distribution.

Exploring the Trade-Offs Local Governments Make in the Pursuit of Economic Growth and Equity

“…This competition for growth exacerbates economic inequality (J. Wang, Ellis, and Rogers 2018) while at the same time federal retrenchment in redistributive policies has left many local governments responsible for ensuring equity while pursuing growth (Cohen 2019).…”

What would happen if we banned billionaires?

“…The capital of the country must increase with the development of the country, and the owners of the capital will also have more wealth and income, thus introducing the gap between the rich and the poor (Buch-Hansen & Koch, 2019). However, many redistribution mechanisms, such as the trickle-down effect and social welfare programs, eventually lead to the Robin Hood effect, which redistribute wealth to the poor (Wang, Ellis, & Rogers, 2018). As a result, the gap between rich and poor will narrow again in more developed countries.…”

Pandering Politicians? Targeted Economic Development Incentives and Voter Response

“…The ability of EDIs to stimulate entrepreneurial activity is similarly lackluster (Tuszynski and Stansel 2018;Partridge et al 2020). Scholars have also become increasingly aware of the role EDIs play in contributing to income inequality through redistribution effects (Langer 2001;Wang, Ellis, and Rogers 2018;Jansa 2020).…”