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Earnings inequality and central-city development


  • Edwin S. Mills


This paper was presented at the conference "Unequal incomes, unequal outcomes? Economic inequality and measures of well-being" as part of session 4, "Economic inequality and local public services." The conference was held at the Federal Reserve Bank of New York on May 7, 1999. The author considers not only the competition between cities, but also the competition between cities and the surrounding areas - the suburbs. He notes that rising income inequality tends to lead to greater income disparity between the suburbs and the central cities because the rich are more likely to move to the suburbs. In addition, business suburbanization has occurred because modern transportation and communication technologies have reduced the costs of moving people, goods, and messages over considerable distances. Moreover, some central business districts have become so large as to exhaust the advantages of locating there. However, the author suggests that the movement of businesses away from central cities began to change around 1996. Tighter labor markets have induced U.S. businesses to locate in central cities for the same reason that these businesses have been going to Mexico and East Asia - namely, the availability of relatively low-wage workers. The author also cites the dramatic fall in central-city crime rates in the 1990s and new legislation allowing cities to limit "brownfields liability" - the liability of businesses for environmental damage that occurred before their occupation of a site - as developments that have made it easier for businesses to return to the central cities.

Suggested Citation

  • Edwin S. Mills, 1999. "Earnings inequality and central-city development," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 133-142.
  • Handle: RePEc:fip:fednep:y:1999:i:sep:p:133-142:n:v.5no.3

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    References listed on IDEAS

    1. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
    2. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, November.
    3. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    4. Mills, Edwin S., 1992. "The measurement and determinants of suburbanization," Journal of Urban Economics, Elsevier, vol. 32(3), pages 377-387, November.
    5. Peter Mieszkowski & Edwin S. Mills, 1993. "The Causes of Metropolitan Suburbanization," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 135-147, Summer.
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    Cited by:

    1. Harry W. Richardson & Peter Gordon, 2000. "Compactness or Sprawl: America's Future vs. the Present," Working Paper 8645, USC Lusk Center for Real Estate.

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    Income distribution ; Income ; Urban economics;


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