Spatial Income Inequality in the United States

Abstract

This paper studies the spatial distribution of household income inequality across 722 U.S. local labor markets—or Commuting Zones—from 2005–2019. The Theil index, its within and between components, and the decomposition of the within component into a shared and differentiated structure are estimated using the American Community Survey. Inequality increased in 72% of CZs. The dynamics within markets drive the rising income inequality pattern due to high accumulation of income in specific CZs. One-fourth of inequality comes from the shared distribution and two-fifths from the differentiated. New York and DC are the labor markets with the highest positive contribution to inequality. San Francisco’s, San Jose’s, and Seattle also contributed to overall inequality in the last few years. CZs with a lower share of income than households tend to be touristic, formerly industrial, or border labor markets. Texas and Oregon displayed an attractive reduction of income inequality in many of their CZs.

Keywords: Income inequality, Income distribution, Spatial Distribution, United States