Richard Vedder

A Dynamic Analysis of Economic Freedom and Income Inequality in the 50 U.S. States: Empirical Evidence of a Parabolic Relationship

This paper examines the dynamic relationship between economic freedom and income inequality in the fifty U.S. states over the 1979-2004 period. Using fixed effects regression analysis, we find evidence that increases in economic freedom are associated with lower income inequality, but the dynamic relationship between the two variables depends on the initial level of economic freedom. This suggests that there may be an inverted U-shaped relationship between economic freedom and income inequality. The inflection point at which additional increases to economic freedom in a state result in less income inequality is estimated. The results are robust to various time periods and several alternative measures of income inequality.

Mobility of Native Americans

Alone woodsman erecting a log cabin, wagon trains curling across the prairies, fur trappers high in the mountains, Indian war parties, gold strikes, frontier marshalls and gunmen—of such stuff the legends of the American West have been formed and in the popular imagination they are the Westward Movement. Of course, serious historians have long recognized that this is merely a fascinating but veneer-like overlay which disguises a massive movement of people from East to West.

Emigration from the United Kingdom to the United States: 1860–1913

Between the years 1860 and 1913 approximately twelve million people took passage from the United Kingdom to extra-European countries. The bulk of the migration stream (about 125,000 people per year) was directed toward the United States; it is this movement of population that is the subject of our article. The flow of individuals from the United Kingdom to the United States in this period ranged from 38,000 in 1861 to 202,000 in 1887 with marked cyclical fluctuations. For example, in 1873 the flow was 167,000 and by 1877 it was only 45,000. Variations of this magnitude pose the interesting intellectual question of whether or not they can be explained. This is not a new question; there are frequent references in the literature to the possible causes of this movement and the emigration from the United Kingdom that it implies. Studies focus on various economic influences on emigration. There is little in this period in the socio-political environment of the United Kingdom that would prompt individuals to emigrate in order to flee intolerable religious or political persecution.

Rent-seeking, distributional coalitions, taxes, relative prices and economic growth

ConclusionsThe results clearly indicate that much of the considerable variation in the pace and pattern of economic growth between the various American states is explainable by institutional arrangements amenable to revisions through public policy. The findings suggest that long run economic growth would be best served by constraining distributional coalitions, be it through constitutional restraints (e.g., balanced budget amendments, the item veto), statutory changes (e.g., subjecting coalitions like labor unions to the antitrust laws), or some other means (e.g., labor and capital fleeing distributional coalitions, such as in the movement of workers and plants to nonunion areas).

Nineteenth century English and Welsh geographic labor mobility: Some further evidence

In a recent issue of this journal, Greenwood and Thomas (G-T) estimated determinants of intercounty migration in England and Wales for 1861, using regression analysis. Coincidently, we performed a similar analysis using 1851 data. As with G-T, we conclude that migrants were sensitive to economic considerations in making their locational choice. Both sets of results are remarkably similar with respect to the pronounced sensitivity of migrants to movement costs, as measured by distance. Unlike G-T, however, we generally observe significantly positive relationships between migration and wage levels in the destination county. Also, our results suggest that migrants were less responsive to job opportunity considerations than those of G-T. Furthermore, we conclude that migrants,ceteris paribus, tended to move to sunnier counties and to be somewhat responsive to public assistance payment levels in making their locational choice. Finally, our results suggest that migrants improved their economic status and contributed to British economic growth by their behavioral patterns.

Spatial variations in U.S. unemployment

Interstate unemployment rate differentials are large, tend to persist, and have not converged in recent times. The interstate differential in the natural rate of unemployment seems partially explained by several factors related to labor costs, including wage rates and such institutional factors as unionization, welfare, and probably tax policy. Differential welfare incidence may explain the black-white unemployment differential. Variations in intertemporal fluctuations in unemployment across states seem related to institutionalized wage rigidity caused by such factors as unions and welfare. For still unexplained reasons, unemployment tends to be higher in the West, deep South, and the industrial Midwest.

Determinants of interstate migration, by race, 1965–1970

This study examines determinants of gross in-migration by race (white and black) over the 1965-1970 time period. The ordinary least squares results reveal that both white migrants and black migrants have an aversion to cold weather and prefer to move shorter rather than longer distances. White migrants were more likely to move to higher per capita income states. Black migrants manifested a strong aversion to states with a higher unemployment rate; however, unlike white migrants, black migrants appeared to be highly attracted to higher welfare states.

The political economy of the peace dividend

We develop a model of the peace dividend and use it to predict the fiscal consequences of a reduction in the demand for military spending. The model is based on the assumption that the political process responds to political demands and costs in a way that maximizes net political benefits. The predictions of our model on how a peace dividend will be allocated over nonmilitary spending, tax relief, and deficit reduction is tested against the experience of eight major wars in United States history.

Labor laws: Then and now

Our thesis is that the statutes governing labor market behavior were passed in a vastly different economic and institutional environment from that which prevails today. The underlying assumptions used to justify those laws are for the most part unrealistic in today’s altered economic climate. The problems of the 1930s or the 1960s are not the problems of the 1990s, and the solutions have changed as well. We show this by exploring four areas of labor law: collective bargaining, wages and hours, income security, and civil rights.

Public policy, higher education, and income inequality in the united states: Have we reached diminishing returns?

Public policy designed to promote greater college enrollment rates has often been justified as a means to reduce income inequalities, yet there is very little evidence that higher college attainment is associated with less inequality. Economic theory at best suggests that the relationship between college attainment and inequality is ambiguous. An overview of some of the unintended consequences of public policies designed to promote greater enrollment is described. One such consequence is that the growth in college completion, which is at least partially attributable to public policy, may have actually contributed to rising income inequality. We hypothesize the existence of a U-shaped relationship between college attainment and income inequality, and using panel data for the 50 U.S. states over the period 1970-2004 provide empirical evidence in support of the curve. Prior to the mid 1990’s, increases in attainment were associated with less inequality for most states. Rapid growth in attainment since then has moved most states to the right of the inflection point such that attainment gains are associated with more inequality in most states.