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Is Income Inequality Endogenous In Regional Growth?

Author

Listed:
  • Yohannes G. Hailu

    (United Nations Economic Commission for Africa)

  • Mulugeta S. Kahsai

    (West Virginia University)

  • Tesfa G. Gebremedhin

    (West Virginia University)

  • Randall W. Jackson

    (West Virginia University)

Abstract

This study focuses on testing the relationship between income inequality and economic growth within counties in the United States, and the channels through which the effects of a relationship are observed. Based on a system of equations estimation, the empirical results confirm the hypotheses that income inequality has a growth-dampening effect, that income inequality is endogenous to regional growth, and that the channels through which income inequality determines growth are adjustments at the regional level, such as migration and changes in employment and incomes. The results have numerous policy implications. The noted forces can be utilized as policy instruments to mitigate income inequality and its growth dampening effects, because a) as income inequality is endogenous, its equilibrium level can be internally determined within a regional growth process, b) since traditional income inequality mitigating policies have an indirect effect on overall regional growth, they may have unintended indirect effects on income inequality, and c) regional growth adjustment also equilibrates income inequality.

Suggested Citation

  • Yohannes G. Hailu & Mulugeta S. Kahsai & Tesfa G. Gebremedhin & Randall W. Jackson, 2011. "Is Income Inequality Endogenous In Regional Growth?," Journal of Income Distribution, Ad libros publications inc., vol. 20(3-4), pages 43-56, September.
    • Handle: RePEc:jid:journl:y:2011:v:20:i:3-4:p:43-56
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    Keywords

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    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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