| The distribution of surplus income affects economic growth, but the literature is inconclusive on whether surplus income should be distributed to savers or spenders. The purpose of this study is twofold: (1) to examine the relationship between U.S. stock market value, economic growth rate, and household income distribution of savers and spenders, and (2) to determine how surplus income in the U.S. should be distributed to achieve economic growth. State governments should be able to make informed policy decisions about surplus income distribution. Archival data were used in a correlation design, and household income distribution of savers and spenders was found to be significant and positively correlated to stock market value, r (68) = 0.76, p < .001 and r (68) = 0.92, p < .001, respectively. A significant negative relationship was found between household income distribution of savers and spenders and economic growth rate, r (68) = -0.48, p < .001 and r (68) = -0.35, p < .01, respectively. Two regression analyses were run to determine predictability of the independent variables on the dependent variables using the following two models: StockM = alpha + beta(Savers) + beta(Spenders) and GrowthR = alpha - beta(Savers) - beta(Spenders). The stock market model explained approximately 95 percent of the variance, R2 = 0.95, F(2, 67) = 584.91, p < .01, and the economic growth model explained approximately 24 percent of the variance, R2 = 0.23, F(2, 67) = 10.13, p < .01. The findings showed that household income of savers and spenders was positively related to stock market value and negatively related to economic growth rate. Recommendations were made to distribute surplus income to savers and spenders during economic development or recession. The majority of surplus income should be distributed to spenders because of their influence (beta = 0.73) on stock market value and consequently, on economic growth as well. Distribution of surplus income to savers should be avoided in a mature economy because there is a negative effect on economic growth. Two recommendations for future research are the use of inflation adjusted income data and mechanisms to distribute surplus income. |
