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Exploring the Causes and Consequences of Regional Income Inequality in Canada

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  • Yannick Marchand
  • Jean Dubé
  • Sébastien Breau

Abstract

The recent surge in populist movements sweeping many countries has brought into focus the issue of regional inequality. In this article, we develop a panel data set for Canada that includes information on 284 regions observed at 5-year intervals (from 1981 to 2011) and estimate a series of spatial econometric models to study the causes and consequences of regional inequality. Our results draw attention to the fact that the rise in inequality at the national level has been accompanied by greater cross-regional inequality. Differences in the level of economic development, precariousness of labor market conditions, and socioeconomic factors are among the key drivers of these regional patterns of inequality. We also find that the industrial mix of a region plays an important role in shaping its distribution of income: regions with high concentrations of manufacturing activities typically have lower levels of inequality, whereas regions with high concentrations of tertiary services, arts, and entertainment, as well as knowledge-intensive business services tend to have higher levels of inequality. In terms of the consequences of inequality, the growth/equity trade-off across Canadian regions varies significantly over the short- vs. medium-term horizons. In the short run, our results suggest that inequality is positively related to regional economic growth. This response changes as we move to a medium-term horizon, which suggests that as inequality persists over longer periods of time, it has a negative and significant impact on regional growth trajectories. Panel vector autoregressive models are also used to further explore the direction of causality of the growth-inequality relationship.

Suggested Citation

  • Yannick Marchand & Jean Dubé & Sébastien Breau, 2020. "Exploring the Causes and Consequences of Regional Income Inequality in Canada," Economic Geography, Taylor & Francis Journals, vol. 96(2), pages 83-107, March.
    • Handle: RePEc:taf:recgxx:v:96:y:2020:i:2:p:83-107
    DOI: 10.1080/00130095.2020.1715793
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    Citations

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    Cited by:

    1. Jesús Peiró-Palomino & William Orlando Prieto-Bustos & Emili Tortosa-Ausina, 2023. "Regional income convergence in Colombia: population, space, and long-run dynamics," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 70(2), pages 559-601, April.
    2. Lichner, Ivan & Lyócsa, Štefan & Výrostová, Eva, 2022. "Nominal and discretionary household income convergence: The effect of a crisis in a small open economy," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 18-31.
    3. Marie Connolly & Catherine Haeck, 2024. "Intergenerational income mobility trends in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 5-26, February.
    4. Ponce, Pablo & Yunga, Fernando & Larrea-Silva, Jhohana & Aguirre, Nikolay, 2023. "Spatial determinants of income inequality at the global level: The role of natural resources," Resources Policy, Elsevier, vol. 84(C).
    5. Muhammad Salar Khan & Abu Bakkar Siddique, 2021. "Spatial Analysis of Regional and Income Inequality in the United States," Economies, MDPI, vol. 9(4), pages 1-21, October.
    6. Buchholz Maximilian & Bathelt Harald, 2021. "Models of Regional Economic Development: Illustrations Using U.S. Data," ZFW – Advances in Economic Geography, De Gruyter, vol. 65(1), pages 28-42, March.
    7. Byron Quito & María de la Cruz del Río‐Rama & José Álvarez‐García & Ronny Correa‐Quezada, 2022. "Impact factors and space‐time characteristics of income inequality in a global sample," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(6), pages 1850-1868, December.
    8. Zhenshan Yang, 2023. "Human capital space: a spatial perspective of the dynamics of people and economic relationships," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.
    9. Fabien Petit & Florencia Jaccoud & Tommaso Ciarli, 2023. "Heterogeneous Adjustments of Labor Markets to Automation Technologies," CESifo Working Paper Series 10237, CESifo.
    10. Diana Barros & Aurora A. C. Teixeira, 2021. "Unlocking the black box: A comprehensive meta-analysis of the main determinants of within-region income inequality," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(1), pages 55-93, February.
    11. Suss, Joel, 2023. "Measuring local, salient economic inequality in the UK," LSE Research Online Documents on Economics 117884, London School of Economics and Political Science, LSE Library.

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