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Price Differentials And Trends In State Income Levels: A Research Note

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  • Steven C. Deller

    (University of Wisconsin-Madison)

  • Martin Shields

    (University of Wisconsin-Madison)

  • David Tomberlin

    (University of Wisconsin-Madison)

Abstract

Most of the discussion of regional income convergence in recent decades has operated under the assumption, either explicit or implicit, that spatial and temporal differences in regional prices (i.e., cost of living and inflation) are negligible. Using five different measures of interstate and interregional income inequality, we examine the evolution of regional income patterns before and after adjusting for price differences. Our results suggest that the common practice of overlooking interspatial differences in cost-of-living and inflation may yield a false understanding of regional income trends and, in tum, false policy prescriptions. Specifically, the pattern of regional income convergence through the 1970s followed by divergence in the 1980s are lost if spatial and temporal differences in regional prices are considered.

Suggested Citation

  • Steven C. Deller & Martin Shields & David Tomberlin, 1996. "Price Differentials And Trends In State Income Levels: A Research Note," The Review of Regional Studies, Southern Regional Science Association, vol. 26(1), pages 99-113, Summer.
    • Handle: RePEc:rre:publsh:v:27:y:1996:i:1:p:99-113
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    References listed on IDEAS

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    1. Cletus C. Coughlin & Thomas B. Mandelbaum, 1988. "Why have state per capita incomes diverged recently?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 24-36.
    2. Bishop, John A & Formby, John P & Thistle, Paul D, 1994. "Convergence and Divergence of Regional Income Distributions and Welfare," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 228-235, May.
    3. Orley M. Amos, Jr., 1989. "An Inquiry into the Causes of Increasing Regional Income Inequality in The United States," The Review of Regional Studies, Southern Regional Science Association, vol. 19(2), pages 1-12, Spring.
    4. Amos, Orley Jr., 1988. "Unbalanced regional growth and regional income inequality in the latter stages of development," Regional Science and Urban Economics, Elsevier, vol. 18(4), pages 549-566, November.
    5. Cletus C. Coughlin & Thomas B. Mandelbaum, 1989. "Have federal spending and taxation contributed to the divergence of state per capita incomes in the 1980s?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 29-42.
    6. Richard J. Cebula, 1989. "The Analysis of Geographic Living-Cost Differentials: A Brief Empirical Note," Land Economics, University of Wisconsin Press, vol. 65(1), pages 64-67.
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    Citations

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    Cited by:

    1. Wojan, Timothy R. & Maung, Adam C., 1998. "The Debate Over State-Level Inequality:Transparent Method, Rules of Evidence, and Empirical Power," The Review of Regional Studies, Southern Regional Science Association, vol. 28(1), pages 63-80, Summer.
    2. repec:wvu:wpaper:06-12 is not listed on IDEAS
    3. Mohamed Abdel-Ghany & Stephen Thoma, 2002. "Distribution of Household Income in America: Effects of Source of Income, Inflation, and Cost of Living Differentials," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 60(1), pages 281-297, December.
    4. George Hammond, 2004. "Metropolitan/non-metropolitan divergence: A spatial Markov chain approach," Economics of Governance, Springer, vol. 83(3), pages 543-563, July.
    5. Petr Janský & Dominika Kolcunová, 2017. "Regional differences in price levels across the European Union and their implications for its regional policy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(3), pages 641-660, May.
    6. George W. Hammond & Eric C. Thompson, 2008. "Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 783-793.
    7. Tatiane Almeida de Menezes & Carlos Roberto Azzoni, 2001. "Estimação de uma Estrutura de Ponderação para as Cidades Brasileiras," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 078, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    8. Duffy, Neal E., 2001. "The Regional Growth of Manufacturing: Markets, Wages, and Labor Composition," The Review of Regional Studies, Southern Regional Science Association, vol. 31(3), pages 255-276, Winter.
    9. Christina Christou & Juncal Cunado & Rangan Gupta, 2019. "Price Convergence Patterns across U.S. States," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 66(2), pages 187-201.
    10. Rokicki, Bartlomiej & Blien, Uwe & Hewings, Geoffrey J.D. & thi Hong Van, Phan, 2021. "Is there a wage curve with regional real wages? An analysis for the US and Poland," Economic Modelling, Elsevier, vol. 102(C).
    11. George Hammond & Eric Thompson, 2002. "Mobility and Modality Trends in US State Personal Income," Regional Studies, Taylor & Francis Journals, vol. 36(4), pages 375-387.
    12. James A. Kurre, 2003. "Is The Cost Of Living Less In Rural Areas?," International Regional Science Review, , vol. 26(1), pages 86-116, January.
    13. Michael Beenstock & Daniel Felsenstein, 2007. "Mobility and Mean Reversion in the Dynamics of Regional Inequality," International Regional Science Review, , vol. 30(4), pages 335-361, October.
    14. George W. Hammond & Eric Thompson, 2006. "Convergence and Mobility: Personal Income Trends in U.S. Metropolitan and Nonmetropolitan Regions," International Regional Science Review, , vol. 29(1), pages 35-63, January.

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