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Why Are Some Places So Much More Unequal Than Others?

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Abstract

This study examines the magnitude and sources of regional wage inequality in the United States. The authors find that, as in the nation as a whole, wage inequality has increased in nearly every metropolitan area since the early 1980s, though there is significant variation among places in both the degree of wage inequality and the pace at which it has risen. The most unequal places tend to be large urban areas that have benefited from strong demand for skill and agglomeration economies, with these factors leading to particularly rapid wage growth for high-skilled workers. The least unequal places tend to have seen weak demand for labor, largely as a consequence of technological change and globalization, and this weakness has led to lackluster wage growth across the entire wage distribution— particularly for middle- and lower-skilled workers. These findings suggest that a relatively low level of regional wage inequality is often the result of a weakening local economy, while relatively high regional wage inequality is often a consequence of strong but uneven economic growth.

Suggested Citation

  • Jaison R. Abel & Richard Deitz, 2019. "Why Are Some Places So Much More Unequal Than Others?," Economic Policy Review, Federal Reserve Bank of New York, vol. 25(Dec).
  • Handle: RePEc:fip:fednep:86712
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    References listed on IDEAS

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    1. Peter Ganong & Daniel W. Shoag, 2017. "Why Has Regional Income Convergence in the U.S. Declined?," NBER Working Papers 23609, National Bureau of Economic Research, Inc.
    2. Bruce Sacerdote, 2017. "Fifty Years Of Growth In American Consumption, Income, And Wages," NBER Working Papers 23292, National Bureau of Economic Research, Inc.
    3. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    4. Abel, Jaison R. & Deitz, Richard, 2015. "Agglomeration and job matching among college graduates," Regional Science and Urban Economics, Elsevier, vol. 51(C), pages 14-24.
    5. Rebecca Diamond, 2016. "The Determinants and Welfare Implications of US Workers' Diverging Location Choices by Skill: 1980-2000," American Economic Review, American Economic Association, vol. 106(3), pages 479-524, March.
    6. Daron Acemoglu & Pascual Restrepo, 2017. "Robots and Jobs: Evidence from US Labor Markets," Boston University - Department of Economics - Working Papers Series dp-297, Boston University - Department of Economics.
    7. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    8. Daron Acemoglu & Pascual Restrepo, 2020. "Robots and Jobs: Evidence from US Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2188-2244.
    9. Nathaniel Baum-Snow & Matthew Freedman & Ronni Pavan, 2018. "Why Has Urban Inequality Increased?," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 1-42, October.
    10. Jaison R. Abel & Ishita Dey & Todd M. Gabe, 2012. "Productivity And The Density Of Human Capital," Journal of Regional Science, Wiley Blackwell, vol. 52(4), pages 562-586, October.
    11. Ganong, Peter & Shoag, Daniel, 2017. "Why has regional income convergence in the U.S. declined?," Journal of Urban Economics, Elsevier, vol. 102(C), pages 76-90.
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    Cited by:

    1. Kevin L. McKinney & John M. Abowd & John Sabelhaus, 2021. "United States Earnings Dynamics: Inequality, Mobility, and Volatility," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, National Bureau of Economic Research, Inc.
    2. Winters, John V., 2020. "Problem on the Plains: College Earnings Premiums in Small Metropolitan Areas," ISU General Staff Papers 202012180800001119, Iowa State University, Department of Economics.
    3. Kemeny, Thomas & Storper, Michael, 2020. "Superstar cities and left-behind places: disruptive innovation, labor demand, and interregional inequality," LSE Research Online Documents on Economics 103312, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    Skills; Wages; Spatial Changes; Inequality; Local Labor Markets;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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