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Poverty, Income Inequality and Economic Growth in U.S. Counties: - page 13 / 33

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where A is the number of people in the open ended category, B is the number of people

in the category immediately preceding the open ended category, L. L

open

is the lower

limit of the open-ended category and L. L

penultimate open

is the lower limit of the

category immediately preceding the open-ended category. Once h is calculated, then the

mean of the open-ended category is calculated as:

M o p e n

  • L. L.

open

(h / h 1)

w h e r e M o p e n

is the mean income for the highest income group. The mean values for all

the counties are higher than the lower limit of the open-ended category confirming that

the measure is a reasonable approximation for the actual values.

4. Model, Data Source and Data Description

Model

To estimate the effects of inequality and poverty on economic growth, I follow

Bhatta (2001) who models economic growth in U.S. counties using the augmented Solow

model that explicitly accounts for human capital. The growth model is developed as

follows:

Y A H N i t i t i t i t

  • ----

    (1)

w h e r e Y i d e n o t e s t h e t o t a l o u t p u t i n c o u n t y i a t t i m e t . A i i s t h e p r o d u c t i v i t y p a r a m e t e r i n

e a c h c o u n t y , H i i s t h e l e v e l o f h u m a n c a p i t a l i n e a c h c o u n t y , a n d N i i s t h e p o p u l a t i o n i n

county i. is the elasticity of output with respect to human capital and is the elasticity

of output with respect to population. Dividing equation (1) by the population, taking

13

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