Growth of regional economy and income inequality: county-level evidence from Florida, USA

Abstract

The purpose of this paper is to find the homogeneous groups and growth factors of Florida's counties through factor analysis and cluster analysis from data sets from 1979 and 2000 and to grasp the relationship between income inequality and growth by cluster using the derived growth factors. The numbers of factors divided through factor analysis were three, and six groups were obtained from cluster analysis. 1 The theoretical background for choosing this particular value is that a factor must have a variance at least as large as that of a single standardized original variable. County-level evidence of this paper indicates that GI_DI and SIN have a strong effect and are statistically significant to the growth rate. Results for income inequality by county and region indicate significant differences between counties, including counties where agriculture accomplishes the primary main function. Therefore, government should adopt the following policies: minimum wage, unemployment insurance, local or state tax policies, income support programmes, and tax reform.