A Comparison of Living Standards across the States of America
58 Pages Posted: 16 Mar 2020 Last revised: 14 Apr 2020
Date Written: March 13, 2020
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: Suggested Citation