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Structural Change and Regional Convergence: The Case of Declining Transport Costs

Regional income inequality within countries is an important contributor to global inequality. I investigate its relationship to economic growth using the US experience since 1880. I modify a multi-sector general equilibrium growth model and highlight two important forces: (1) structural change, which disproportionately benefit poor agricultural regions; and (2) transport cost reductions, which shrinks regional price and wage differences. Structural change contributes to Southern growth but is offset in the Midwest by transport cost reductions. The Midwest case is of greater relevance for developing countries with high transport costs, and suggests growth may not significantly reduce global income inequality.

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Paper provided by Wilfrid Laurier University, Department of Economics in its series Working Papers with number tt0061.

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Length: 28
Date of creation: 2012
Date of revision: 2012
Handle: RePEc:wlu:wpaper:tt0061
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  1. Reto Foellmi & Josef Zweilmueller, 2006. "Structural Change and the Kaldor Facts of Economic Growth," 2006 Meeting Papers 342, Society for Economic Dynamics.
  2. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 1997. "Beyond Balanced Growth," NBER Working Papers 6159, National Bureau of Economic Research, Inc.
  3. David E. Sahn & David C. Stifel, 2003. "Urban--Rural Inequality in Living Standards in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(4), pages 564-597, December.
  4. Jeremy Greenwood & Gokce Uysal, 2004. "New Goods and the Transition to a New Economy," NBER Working Papers 10793, National Bureau of Economic Research, Inc.
  5. Heshmati, Almas, 2004. "Regional Income Inequality in Selected Large Countries," IZA Discussion Papers 1307, Institute for the Study of Labor (IZA).
  6. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
  7. Paci, Raffaele & Pigliaru, Francesco, 1997. "Structural change and convergence: an Italian regional perspective," Structural Change and Economic Dynamics, Elsevier, vol. 8(3), pages 297-318, August.
  8. Zhang, Xiaobo & Kanbur, Ravi, 2003. "Spatial Inequality In Education And Health Care In China," Working Papers 127256, Cornell University, Department of Applied Economics and Management.
  9. Arilton Teixeira & Berthold Herrendorf & James A. Schmitz Jr., 2009. "Transportation and Development:Insights from the U.S. 1840-1860," Fucape Working Papers 18, Fucape Business School.
  10. François Bourguignon & Christian Morrisson, 2001. "Inequality among World Citizens : 1820-1992," DELTA Working Papers 2001-18, DELTA (Ecole normale supérieure).
  11. Douglas Gollin & Richard Rogerson, 2014. "Agriculture, Roads, and Economic Development in Uganda," NBER Chapters, in: African Successes, Volume IV: Sustainable Growth, pages 69-110 National Bureau of Economic Research, Inc.
  12. Edward L. Glaeser & Janet E. Kohlhase, 2003. "Cities, Regions and the Decline of Transport Costs," Harvard Institute of Economic Research Working Papers 2014, Harvard - Institute of Economic Research.
  13. Michael R. Haines, 1989. "A State and Local Consumer Price Index for the United States in 1890," NBER Historical Working Papers 0002, National Bureau of Economic Research, Inc.
  14. Knick Harley, C., 1980. "Transportation, the world wheat trade, and the Kuznets Cycle, 1850-1913," Explorations in Economic History, Elsevier, vol. 17(3), pages 218-250, July.
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