A Comparison of Living Standards across the States of America

58 Pages Posted: 16 Mar 2020 Last revised: 14 Apr 2020

See all articles by Elena Falcettoni

Elena Falcettoni

Board of Governors of the Federal Reserve System

Vegard M. Nygaard

University of Houston

Multiple version iconThere are 3 versions of this paper

Date Written: March 13, 2020

Abstract

We use an expected utility framework to examine how living standards, or welfare, vary across the U.S. and how each state’s welfare has evolved over time. Our welfare measure accounts for cross-state variations in mortality, consumption, education, inequality, and cost of living. Per-capita income is a good indicator of welfare (correlation=0.80). Welfare in most states, however, appear closer to those in the richest states than their difference in per-capita income would suggest. Whereas high-income states benefit from higher life expectancy, consumption, and college attainment, low-income states benefit from lower cost of living. While all states experienced positive welfare growth between 1999 and 2015, the annual welfare growth rate varied from 1.38–3.76 percent across states due to varying gains in life expectancy, consumption, and college attainment, with life expectancy accounting for 50.3 percent of the variation. Per- capita income and welfare growth are only weakly correlated (correlation=0.38), and deviations are often large.

Keywords: Welfare comparison; Expected lifetime utility; States of America

JEL Classification: D63, I31, O50, R13

Suggested Citation

Falcettoni, Elena and Nygaard, Vegard M., A Comparison of Living Standards across the States of America (March 13, 2020). Available at SSRN: https://ssrn.com/abstract=3539893 or http://dx.doi.org/10.2139/ssrn.3539893

Elena Falcettoni (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th and Constitution Ave NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.elenafalcettoni.com

Vegard M. Nygaard

University of Houston ( email )

Houston, TX 77204-5882
United States

HOME PAGE: http://https://sites.google.com/site/vegardmokleivnygaard/

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