Why has regional income convergence in the U.S. declined?

1. “For over a century, incomes across states converged at a rate of 1.8% per year…The convergence rate from 1990 to 2010 was less than half the historic norm, and in the period leading up to the Great Recession there was virtually no convergence at all.”

2. After subtracting housing costs, janitors in NYC now earn less than they do in the Deep South.  This was not the case for most of American history.

3. For NYC janitors, housing costs measure at 52% of their income.

4. Income differences across states are increasingly capitalized into housing prices.

5. “…income convergence declined the most in areas with [land] supply constraints.”

6. “Had [cross-state] convergence continued apace through 2010…the increase in hourly wage inequality from 1980 to 2010 would have been 8% smaller.”

That is from a new NBER working paper, “Why has Regional Income Convergence in the US Declined?”, by Peter Ganong and Daniel W. Shoag.  Here are earlier ungated versions.

Note that this paper contains “…the first national panel measure of land use regulations in the US.”

Comments

Comments for this post are closed