The Income-Inequality Relationship within US Metropolitan Areas 1980-2016

Abstract

Economic growth might both increase and decrease income inequality, also at the city level. This paper examines the income-inequality relationship within US metropolitan areas and finds that it changes over time. A higher average income per capita level was associated with a lower inequality level in earlier years, but this association vanished later. For the 1980-2000 panel, increases in the average income per capita are associated with decreases in inequality. In contrast, increases in the average income per capita are associated with increases in inequality in the 2006-2016 panel. The obtained results hint at polarization re-sulting from technological change substituting middle-skill routine tasks.