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Mobility and Mean Reversion in the Dynamics of Regional Inequality

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  • Michael Beenstock

    (Department of Economics, Hebrew University of Jerusalem, Mt. Scopus, Jerusalem, Israel, msbin@mscc.huji.ac.il)

  • Daniel Felsenstein

    (Department of Geography, Hebrew University of Jerusalem, Mt. Scopus, Jerusalem, Israel, msdfels@mscc.huji.ac.il)

Abstract

The literature on regional growth convergence and economic disparities has tended to confound four interwoven measurement phenomena: 1) mean reversion (so-called beta convergence)—richer regions move towards the average from above and poorer regions from below; 2) diminishing inequality (so called sigma convergence)—the horizontal or spatial distribution of income becomes more equal; 3) mobility—the rank of a region in the overall distribution of income changes either upwards or downwards; and 4) leveling—the richer regions become poorer (leveling-down) or the poorer regions become richer (leveling-up). We use a new statistical methodology that treats these four phenomena on an integrated basis. The methodology is applied to Israeli regional earnings. We show that regional earnings are Gini divergent, but after adjusting earnings for regional cost-of-living differential, this picture is reversed. In the absence of genuine cost-of-living data, a simple and practical method is proposed, whereby regional house price data are used to proxy regional cost-of-living differentials.

Suggested Citation

  • 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.
    • Handle: RePEc:sae:inrsre:v:30:y:2007:i:4:p:335-361
    DOI: 10.1177/0160017607304542
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    4. Rey, Sergio, 2016. "Space-time patterns of rank concordance: Local indicators of mobility association with application to spatial income inequality dynamics," MPRA Paper 69480, University Library of Munich, Germany.
    5. Domenica Panzera & Paolo Postiglione, 2020. "Measuring the Spatial Dimension of Regional Inequality: An Approach Based on the Gini Correlation Measure," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(2), pages 379-394, April.
    6. Gluschenko, Konstantin & Karandashova, Maria, 2016. "Price Levels across Russian Regions," MPRA Paper 75041, University Library of Munich, Germany.
    7. Daniel Felsenstein, 2011. "Capital Deepening and Regional Inequality: An Empirical Analysis (refereed paper)," ERSA conference papers ersa10p759, European Regional Science Association.
    8. Michael Beenstock & Daniel Felsenstein, 2008. "Regional Heterogeneity, Conditional Convergence and Regional Inequality," Regional Studies, Taylor & Francis Journals, vol. 42(4), pages 475-488.
    9. Hou, Li & Jin, Baisuo & Wu, Yuehua, 2024. "Estimation and variable selection for high-dimensional spatial dynamic panel data models," Journal of Econometrics, Elsevier, vol. 238(2).
    10. Portnov, Boris A. & Felsenstein, Daniel, 2010. "On the suitability of income inequality measures for regional analysis: Some evidence from simulation analysis and bootstrapping tests," Socio-Economic Planning Sciences, Elsevier, vol. 44(4), pages 212-219, December.
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