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Poverty, Income Inequality and Economic Growth in U.S. Counties:

A Spatial Analysis

Ramaprasad Rajaram*

Abstract

This study estimates the effects of initial (1979) level of poverty and income inequality on subsequent economic growth (between 1979 and 1999) for the U.S. counties using the U.S. Census data for the years 1980 and 2000. The results provide evidence that counties with lower levels of income inequality and poverty in 1979 experienced higher economic growth between 1979 and 1999 than others. At the same time, counties that experienced higher economic growth between 1979 and 1999 had lower levels of poverty and income inequality in 1999, suggesting a positive and virtuous cycle of poverty and income inequality reduction, and higher economic growth. Since geographic location can affect economic growth through externalities, I employ a spatial analysis. The results show that spatial parameters are significant determinants of growth, income inequality and poverty.

JEL classification: C21, I32, O15, R11 Key words: Economic growth; Poverty; Income distribution; Spatial effects; Counties

June 25, 2009

  • *

    Department of Economics, Terry College of Business, The University of Georgia,

Athens, GA 30602 USA. Phone +1-706-294-5425. Email: rameco@uga.edu.

I sincerely thank LeSage for his valuable comments on Matlab codes and Chadi Abdallah for helping me with Matlab.

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