Changes in Income Inequality Under Democratic and Republican Governors

Abstract

I examined a panel of all 50 states over a period of 30 years between 1981 and 2010, estimating a random effects model to examine the relationship between the party of a state’s governor and changes in pretax and transfer income inequality. Though the literature has quite consistently shown that income inequality increases more quickly under Republican governors or when policies favored by Republicans are implemented, I find no evidence to support this, though this is perhaps because I did not allow a long enough lag time for new policies to have an effect.

I did, however, find that pretax income inequality increases more quickly under Democratic presidents than under Republicans, in spite of the fact that all previous research shows the opposite to be true. I suspect that this unusual finding is the result of a quirk in my 1981-2010 time frame, namely the effects of the shift in welfare policy under the Clinton administration in the 1990s.