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By reviewing US state-level panel data on infrastructure spending and on per capita income inequality over a 60-year period, from 1950 to 2010, this paper sets out to test whether there is an empirical link between infrastructure and inequality. Our main results, obtained from panel regressions with both state and time fixed eects, show that highways and higher education spending growth in a given decade correlates negatively with Gini indices at the end of the decade, suggesting a causal eect from growth in infrastructure spending to a reduction in inequality. This relationship is stronger with inequality at the bottom 40% of the income distribution and also for highways spending. A counterfactual experiment reveals which states ended up with a significantly higher bottom Gini coecient in 2010 due to underinvestment in infrastructure in the 2000s. A second related goal of this paper, from a policy making perspective, is to highlight innovations in finance for infrastructure investments, for the US, other mature markets and also for developing economies.
