The Contribution of National Income Inequality to Regional Economic Divergence

Abstract

After more than a century of convergence, the economic fortunes of rich and poor regions of the United States have diverged dramatically over the last 40 years. Roughly a third of the US population now lives in metropolitan areas that are substantially richer or poorer than the nation as a whole, almost three times the proportion that did in 1980. In this paper I use counterfactual simulations based on Census microdata to understand the dynamics of regional divergence. I first show that regional divergence has primarily resulted from the richest people and places pulling away from the rest of the country. I then estimate the relative contributions to regional divergence of two major socioeconomic trends of recent decades: the sorting of people across metro areas by income level and the national rise in income inequality. I show that the national rise in income inequality is sufficient on its own to account for more than half of the observed divergence across regions, while income sorting on its own accounts for less than a quarter. The major driver of regional economic divergence is national-level income dispersion that has exacerbated preexisting spatial inequalities.

Income Inequality across the Rural‐Urban Continuum in the United States, 1970–2016*

“…The limited attention to the sub‐national scale has also restricted knowledge about whether and how trends in income inequality may vary between rural and urban areas, and among different types of rural and urban localities. Such differences are expected given the major, but spatially heterogeneous economic and demographic changes that have occurred in the past half‐century (Bailey, Jensen, and Ransom 2014; Brown and Swanson 2004; Johnson 2020; Lichter 2012; Lichter and Brown 2011; Manduca 2019; Vias and Nelson 2006; Yang and Jensen 2015). Accordingly, this study focuses explicitly on how county‐level income inequality in the United States varies across the rural‐urban continuum, and how these patterns have changed over the past fifty years.…”

“…The United States—like other countries—is fragmented into sub‐national spaces that differ in terms of their demographic composition and social structure. As a result, the link between national‐level trends and local conditions is complex and sometimes tenuous (Manduca 2019; Thiede and Monnat 2016).…”

The Dual Dependency of Natural Resource Rich Labor Markets in Contemporary Society

“…Finally, it is important to acknowledge that while the presented theory operates at the level of the community, the negative impacts of dual dependency are not felt equally throughout the population. There exists a long list of social inequalities within nations such as the United States (Bailey et al, 2017;Bell and Owens-Young, 2020;Chetty et al, 2014;Lobao, 2016;Manduca, 2019;Williams, 2017). While these inequalities do fall along the spatial lines of rural and urban discussed here, they are more pronounced along lines of race, gender, ethnicity, and class.…”

Resistance as Sacrifice: Toward an Ascetic Antiracism

“…America's wealth is being concentrated in urban, coastal regions, particularly the West Coast (Seattle through San Diego), Chicago, and the northeast corridor running from Boston, through New York to Washington, DC (Frank ; Manduca ; Time Labs ). These regions also serve as hubs for the most lucrative and essential industries in today's economy—finance, consulting, law, technology, medicine (Yang ).…”