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

Peter Ganong, Daniel W. Shoag

NBER Working Paper No. 23609
Issued in July 2017
NBER Program(s):Development of the American Economy, Labor Studies, Public Economics

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.

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Document Object Identifier (DOI): 10.3386/w23609

Published: Peter Ganong & Daniel Shoag, 2017. "Why Has Regional Income Convergence in the U.S. Declined?," Journal of Urban Economics, .

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