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Poverty, Income Inequality and Economic Growth in U.S. Counties: - page 3 / 33





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poverty and economic growth crucially depend on a given level of income inequality.

Moreover, the relationship between income inequality and economic growth is

sometimes better suited to explain the relationships between poverty and economic

growth (Bhatta 2001).

Although there are more number of cross-country studies that analyze the

relationship between economic growth, poverty and income-inequality, country-specific

analysis has certain advantages over cross-country analysis. First, the method used to

gather information on the relevant variables across countries is not as uniform or

standardized compared to data collected within a country (Ravallion 2001). Second, laws

and policies, which can significantly affect economic growth, poverty and inequality,

vary across countries more than they do within a country. Third, definitions of variables

differ widely across countries. For instance, poverty is defined from a consumption angle

in India, while it is based on income levels in the United States.

I use the 1980 and 2000 U.S. decennial Census data to measure the initial values

and end of the period values, respectively. This twenty-year period serves to capture the

consequences of long run growth in the most recent past for the U.S. counties. The advent

of information technology and the resultant globalization in the late eighties and early

nineties lead to unprecedented economic growth in the U.S. (Rupasingha et al. 2002)

making the time frame informative and appropriate for this analysis. I use the change in

per capita personal income between 1979 and 1999 to measure economic growth, the

rationale for which is explained in section 4. I measure income inequality by constructing

Gini index for all the counties in the U.S. (explained in detail in section 3), and use the

percentage of poor people in each county to measure poverty.


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