Changing Fortunes: An analysis of the dynamics of income inequality in US metropolitan areas

Alicia Cavanaugh,Sébastien Breau

doi:10.7202/1083640ar

Abstract

Income inequality has increased significantly in OECD countries over the last few decades. Rising inequality has been particularly pronounced in the United States, especially so in metropolitan areas. During this time, the increasingly uneven distribution of income reflects the pulling away of high-income earners, as well as increased returns to skilled workers. This study uses IPUMS data to build a novel dataset for 226 MSAs over the 1980 to 2010 period. Results suggest that education has had the strongest impact on rising inequality across US metropolitan areas. Our findings also suggest that supply-side factors such as racial segregation and the size of the immigrant population are likewise positively linked with greater inequality.

Highlights

Income inequality has increased substantially in recent decades, especially within developed nations
Evidence of rising inequality first emerged in the US and the UK in the late 1970s and early 1980s, a pattern soon followed by most other OECD nations (OECD, 2011)
In the United States, the increase in inequality has been especially severe; by the time of the Great Recession of 2008-09, American income inequality had reached levels not seen since the late 1920s (Piketty, 2014)

Summary

INTRODUCTION

Income inequality has increased substantially in recent decades, especially within developed nations. We do so by developing a novel dataset of metropolitan characteristics in the US over the 1980 to 2010 period This dataset is used to pursue two objectives: 1) examine how trends in metropolitan income inequality have changed over a long period of time, and 2) explore the factors that have influenced these patterns. MSAs are representative of labour market geographies that stretch beyond central city boundaries, making metropolitan areas an ideal unit to examine individual and household economic outcomes within similar economic contexts (Madden, 2000) Beyond their role as a market proxy, MSAs are useful in studying income inequality because they represent an environment where people live in close-proximity to each other and can compare outcomes and conditions of those living nearby (Madden, 2000). We present results from our models before concluding with a discussion of our findings

LITERATURE REVIEW

METHODOLOGY

Summary statistics

Findings

CONCLUSION