The income-inequality relationship within U.S. metropolitan areas 1980-2016

Economic growth might both increase and decrease income inequality, depending on the circumstances. The nature of this relationship matters at the city level as well. This paper examines the income-inequality relationship within U.S. metropolitan areas using cross-section and panel regression techniques over the 1980-2016 period. It finds that this relationship changes over time. A higher per capita income level was associated with a lower within-MSA inequality level in earlier years, but this association vanished later. For the 1980-2000 panel, per capita income increases are accordingly associated with decreases in inequality. In contrast, an increase in per capita income is associated with an increase in inequality in the 2006-2016 panel. The obtained results hint at polarization resulting from technological change substituting middle-skill routine tasks, but further research is still required to solve this puzzle.