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Exploring the Role of Unearned and Non-Wage Income on Regional Income Convergence

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  • James, Ryan D.
  • Campbell Jr., Harrison S.

Abstract

In the second half of the 20th century, regional income in the United States converged. Convergence was driven largely by neo - classical forces where capital flows from regions of high wages to regions of low wages in search of greater returns. The formal test for convergence, driven by the attractive and repulsive effects of wage levels, regresses changes in in- come against initial income levels. However, unearned and non - wage have become increasingly important components of income, yet their effects on the convergence process is largely unexplored. To add insight to their role in convergence, this paper deconstructs Per Capita Personal Income into its component parts – Wages and Supplements, Dividends, Interest and Rent, Transfer Payments, and Proprietor’s Income – and tests for unconditional convergence among Metropolitan/Micropolitan areas across three time periods. Results suggest consistent convergence stemming from wages and significant, localized effects stemming from the unearned, non - wage income streams.

Suggested Citation

  • James, Ryan D. & Campbell Jr., Harrison S., 2016. "Exploring the Role of Unearned and Non-Wage Income on Regional Income Convergence," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(2), December.
    • Handle: RePEc:ags:jrapmc:262575
    DOI: 10.22004/ag.econ.262575
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