LAUSR

Abstract This study examines the effects of government spending during childhood on the association between income inequality and intergenerational income mobility. I use the National Longitudinal Survey of Youth 1979 data with state-level measures of income inequality and per-capita total government spending that includes federal, state and local expenditures on education, public welfare, and health care. The 4824 parents-children pairs are used for the analysis. This study provides evidence that additional government spending contributes to promoting intergenerational income mobility. Moreover, government spending moderates the effects of income inequality on intergenerational income mobility. This evidence indicates that government spending plays a role in preventing the decrease in intergenerational income mobility by offsetting the consequences of income inequality.