Income Inequality and Economic Growth : What relation does regional income inequality have with local economic growth in US Metropolitan Areas?

Abstract: Income inequality has been widely debated since the beginning of economic development. This topic is especially present in today’s economic world as the gap between the poor and rich only seem to widen, even in developed nations. Surprisingly, this is especially true for the United States where the top 1 percent own almost 50 percent of the nation’s income shares. Several studies have spoken on the impact inequality has on a nation, but few have commented on the effect it may have on a nation’s economic growth. Therefore, this paper aims to examine what relationship exists between regional inequality and local economic growth in 357 metropolitan cities in America. With the data gathered from the U.S. Census Bureau and several other databases, between the years 2010 and 2015, a series of OLS regressions are run. It is important to note research on the impact of income inequality on economic growth is few and far between, primarily on the city level due to data limitations. Thus, this disposition further contributes within the field of regional economics. The results in this paper, when regressing Gini to GDP Per Capita Growth and GDP Per Capita level, show Gini has a positive and significant relationship with GDP Per Capita Growth versus a negative and insignificant relationship with GDP Per Capita level.