An analysis of family income inequality in metropolitan counties

The purpose of this study is to determine which factors affect family income inequality in metropolitan counties in the United States. Unlike most previous studies, this study considers the possibility that state-level cultural characteristics may affect county-level income inequality. Using data from the 1990 Census of the Population in an OLS regression model, county-level income inequality is regressed on an a variety of demographic, economic, and geographic characteristics of the county. Special attention is paid to the effect of state-level cultural characteristics and employment growth. This paper finds that counties in states with relatively liberal public policies have less income inequality than counties in states with relatively conservative public policies. However, only weak evidence is found to indicate that employment growth reduces income inequality. A surprising finding is the weak effect of employment growth. Since policymakers often view policies that induce employment growth as a method of reducing income inequality, this study suggests that such policies may not reduce inequality.