The Political-Economic and Demographic Causes of Metropolitan Income Inequality and Its Components

Abstract

This research project examines variations in inequality in individual earned incomes across U.S. metropolitan areas. The main analysis includes thirteen explanatory variables from three major perspectives - the political economy perspective, the demand-side perspective and the labor force supply-side perspective. In addition, I applied path models to explain causalities between some independent variables and used the decomposition of the Theil index to show the between-group effects. The results indicate that most demand-side and supply-side factors significantly contribute to variances in metropolitan income inequalities, while the impact of political economic factors are very limited. The paper is organized in the following manner: Chapter I is the introduction; Chapter II reviews literature focusing on the level of earning inequality and its predictors; Chapter III describes data and measures of variables; Chapter IV introduces statistical methods (including OLS regression model, path analysis, and decomposition of the Theil index); Chapter V presents the results of OLS regression model and its explanations; Chapter VI explains path analysis and decomposition analysis and their results; and finally, Chapter VII discusses the current research project and its implications for future studies.