The economic impact of spatial income inequality

Spatial income inequality refers to the unequal distribution of income across communities. This study broadens the concept to include residential segregation, central city-suburban income disparity, and government fragmentation. Combining the complementary effect perspective and spatial mismatch hypothesis, this project hypothesizes that residential segregation negatively impacts metropolitan economic growth. Arguments from agglomeration effect suggest the natural tie between central cities and suburbs, and support the negative impact of distressed central cities on metropolitan economic growth. Although there is a hot debate between public choice theories and urban regionalism about metropolitan governance, this project follows the arguments of regionalists and hypothesizes that metropolitan areas with higher government fragmentation are associated with slower economic growth. Based on data from U.S. Census, U.S. Bureau of Economic Analysis, and other resources, this project conducted three OLS estimations on economic growth in ten years based on data in the 1980s, 1990s and 2000 to test the hypotheses. Dependent variables are annual average growth rates of real personal income per capita in 1980- 1989, 1990-1999, and 2000-2005. Then an OLS estimation was conducted on the long-term economic growth from 1980 to 2005. Results show that racial segregation has a negative impact on both short term and long term economic growth. The negative impact of income segregation emerged from 1990s and turns robust in the model of 2000. The negative sign of percent of black families without a car indicates that theory about spatial mismatch in urban labor market suggesting the negative impact of residential segregation on economic growth is supported. The changing sign of income disparity between central cities and suburbs is not consistent and need to be cautiously interpreted. The positive impact of special districts supports regional-wide metropolitan governance. Although more analyses need to be done to understand the results from the model of the data in 1990s, the results suggest policy implications. That is, comprehensive strategies need to be considered to increase the quality of life of the poor and economic growth through breaking the barriers among different communities. A comprehensive program plan, including social policy, financial policy, housing and land-use policy targeted to resolve the fundamental urban problem might be more effective than the current isolated policy structure implemented independently by different sectors in different fields