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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. Foellmi, Reto & Zweimüller, Josef, 2002. "Structural Change and the Kaldor Facts of Economic Growth," IZA Discussion Papers 472, Institute for the Study of Labor (IZA).
  2. Sahn, David E. & Stifel, David C., 2004. "Urban-Rural Inequality in Living Standards in Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
  4. 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.
  5. Douglas Gollin & Richard Rogerson, 2010. "Agriculture, Roads, and Economic Development in Uganda," NBER Working Papers 15863, National Bureau of Economic Research, Inc.
  6. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4656, London School of Economics and Political Science, LSE Library.
  7. Berthold Herrendorf & James A. Schmitz & Arilton Teixeira, 2009. "Transportation and development: insights from the U.S., 1840-1860," Staff Report 425, Federal Reserve Bank of Minneapolis.
  8. 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.
  9. Jeremy Greenwood & Gokce Uysal, 2003. "New Goods and the Transition to a New Economy," Economie d'Avant Garde Research Reports 5, Economie d'Avant Garde.
  10. 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.
  11. 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.
  12. Heshmati, Almas, 2004. "Regional Income Inequality in Selected Large Countries," IZA Discussion Papers 1307, Institute for the Study of Labor (IZA).
  13. 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.
  14. François Bourguignon & Christian Morrisson, 2001. "Inequality among World Citizens : 1820-1992," DELTA Working Papers 2001-18, DELTA (Ecole normale supérieure).
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