Why Has Regional Income Convergence in the U.S. Declined?

37 Pages Posted: 25 Jul 2017 Last revised: 8 Jul 2019

See all articles by Peter Ganong

Peter Ganong

University of Chicago

Daniel Shoag

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2017

Abstract

The past thirty years have seen a dramatic decline in the rate of income convergence across states and in population flows to high-income places. These changes coincide with a disproportionate increase in housing prices in high-income places, a divergence in the skill-specific returns to moving to high-income places, and a redirection of low-skill migration away from high-income places. We develop a model in which rising housing prices in high-income areas deter low-skill migration and slow income convergence. Using a new panel measure of housing supply regulations, we demonstrate the importance of this channel in the data.

Suggested Citation

Ganong, Peter and Shoag, Daniel, Why Has Regional Income Convergence in the U.S. Declined? (July 2017). NBER Working Paper No. w23609. Available at SSRN: https://ssrn.com/abstract=3007481

Peter Ganong (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Daniel Shoag

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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