Cost of Living and Welfare Expenditures in Blue States VS. Red States
California is a costly place to live compared to most states. So are Massachusetts and New York. Retirees often pick up stakes and move to other states like Arizona and Florida, partly because of the warm winters, but also because the cost of living is relatively low compared to where they made their careers. Interstate cost of living differentials seem to be taken as a given, almost as as the different weather patterns of Oregon and Oklahoma.
This study econometrically demonstrates that California is not a relatively costly place to live just because lots of people want to live there. It is a costly state due to state and local policies such as heavy-handed land-use regulation, occupational licensing, minimum wages, family and disability benefit labor regulations, and energy regulation. In other words, it is not that lots of people want to live in high-cost states and push up prices that the cost of living is high in those states.
The cost of living is high because states adopt policies that make the states more costly places to do business, to buy property, and to obtain a given standard of living.
When states’ average personal incomes are adjusted for their cost of living, it radically changes the picture of which states are the most prosperous. Apparently prosperous California sinks below Mississippi. Oklahoma, middling in official statistics, rises to actually outrank Massachusetts. Texas ends up in the top 10. Apparently prosperous states that have high costs of living are shown not to be so prosperous after all, once you account for how little that can be purchased with those high incomes. And as it turns out, high-cost states tend to be “blue” in their voting patterns while low-cost states tend to be “red,” politically...
Also addressed in this paper is why state policymakers should do more to consider cost of living, and specific policies they can pursue to reduce it in their states. These include: 1) limiting land-use regulation, especially zoning, 2) reducing labor regulations, including occupational licensing, minimum wages, family leave, and disability benefit requirements, 3) passing right-to-work laws, 4) reducing startup and filing fees for businesses, and 5) reducing monopolistic regulation in electric energy.
Policy issues are often statistically investigated for how they impact GDP—either its growth over time, or its total—frequently with frustrating results. The analysis contained in this paper suggests that researchers have been missing something more fundamental: the cost of living...
Posted Jan 31, 2026, 1:16 PM UTC