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Poverty, Income Inequality and Economic Growth in U.S. Counties: - page 4 / 33

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Some studies at the U.S. county level have analyzed the determinants of economic

growth with inequality amongst one of the several explanatory variables (Rupasingha et

al. 2002). Similarly, studies that analyze the causes of poverty at the county level include

economic growth as one of the several explanatory variables (Rupasingha and Goetz

2007, Levernier et al. 2000). Bhatta (2001) studies the relationship among economic

growth, poverty and income inequality in the U.S. Metropolitan Statistical Areas

(MSA’s). However, no study has analyzed whether initial level of poverty and inequality

affect subsequent economic growth, and whether economic growth reduces the end of the

period poverty and income inequality at the county level. In addition, this study also

investigates whether such a relationship differs among rich and poor counties, which no

study has done before.

I employ a spatial analysis as location parameters can affect economic growth via

the externalities associated with access to markets, flow of goods and ideas (Redding and

Venables 2002). The results from this study show that counties with low levels of income

inequality and poverty in 1979 experienced higher economic growth between 1979 and

1999, than others. At the same time, counties with high economic growth over the twenty

years (between 1979 and 1999) experienced lower income inequality and poverty in

1999, compared to others. These results suggest that there could be a virtuous cycle of

poverty and inequality reduction, and higher economic growth for the U.S. counties. The

results do not vary across rich and poor counties.

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