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Is Income Inequality Endogenous in Regional Growth?

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  • Hailu, Yohannes G.
  • Kahsai, Mulugeta S.
  • Gebremedhin, Tesfa G.
  • Jackson, Randall W.

Abstract

This study focuses on testing the relationship between income inequality and growth within U.S. counties, and the channels through which such effects are observed. The study tests three hypotheses: (1) income inequality has an inverse relationship with growth; (2) regional growth adjustments are the channels through which the inequality and growth are equilibrated; and (3) income inequality is endogenous to regional growth and its adjustment. Results, based on a system of equations estimation, confirm the hypotheses that income inequality has a growth dampening effect; income inequality is endogenous to regional growth and growth adjustment; and the channels through which income inequality determines growth are regional growth adjustments, such as migration and regional adjustment in job and income growth. Results have numerous policy implications: (1) to the extent that income inequality is endogenous, its equilibrium level can be internally determined within a regional growth process; (2) to the extent that traditional income inequality mitigating policies have indirect effect on overall regional growth, they may have unintended indirect effects on income inequality; and (3) to the extent that regional growth adjustment also equilibrates income inequality, such forces can be utilized as policy instruments to mitigate income inequality, and its growth dampening effects hence forth.

Suggested Citation

  • Hailu, Yohannes G. & Kahsai, Mulugeta S. & Gebremedhin, Tesfa G. & Jackson, Randall W., 2009. "Is Income Inequality Endogenous in Regional Growth?," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46320, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saeana:46320
    DOI: 10.22004/ag.econ.46320
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    More about this item

    Keywords

    Community/Rural/Urban Development; Public Economics;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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