Government Spending and the Distribution of Economic Growth

In the United States, total government spending, and especially government social spending, has increased greatly over the last 50 years. What effect this has had on economic growth is a subject of intense debate among politicians, policymakers, and economists. However, there has been less attention paid to the distributional effects of government spending even though economic inequality has grown greatly over the last generation and much social spending is at least indirectly intended to reduce inequality. The effects of government social spending in the United States on growth in family income at deciles of the income distribution were estimated. The results suggested that social spending but not non-social spending was likely to increase growth in family income per capita measured over 10-year intervals. The largest effects of social spending were for deciles below the median income. At no point in the distribution does social spending have a negative effect.