Income Distribution and Social Expenditures

Abstract

Economic inequality, actual or perceived, plays an important role in influencing the set of goods and services that are subsidized by the public sector. Public expenditures on defense, police and fire services, roads, foreign aid, or research and development may (or may not) have benefits for all citizens. However, except for those directly employed in these activities, such expenditures do not directly affect the well-being of households. In this chapter, we focus on public expenditures that provide income or goods and services directly to households. This implies that we are primarily concerned with public expenditure on the provision of ‘private goods,’ including cash and near-cash transfers.¹

America’s high earners—the fortunate top fifth—thus feel increasingly justified in paying only what is necessary to insure that everyone in their community is sufficiently well educated and has access to the public services they need to succeed

Reich (1991)

The authors would like to acknowledge the assistance of Michael Eriksen and Joseph Marchand from the Center for Policy Research. The authors thank The Russell Sage Foundation, the ISER at the University of Essex, and the SPRC at The UNSW, Sydney, Australia, for support while working on this paper. Helpful discussions were had with Christopher Jencks, Iry Garfinkel, Sara McLanahan, David Brady, Robert Haveman, David Soskice and Robert Goodin. Helpful comments were made by Dan Rosenbaum, Janet Gornick, Pablo Beramendi and Nancy Folbre, and at seminars at the Center for Advanced Study, Standford, CA; ANU, Canberra Australia; Syracuse University; and the Special Program on the Social Dimensions of Inequality Conference in Washington, DC. The authors wish to thank Andrea Johnson, Lynn Lethbridge, JoAnna Moskal, Mary Santy, Martha Bonney and Kati Foley for their excellent help with manuscript preparation. All errors are our own.