The Interruption of Income Convergence and Income Growth in Large Cities in the 1980s

Abstract

Recent studies have documented the divergence of per capita personal income among regions of the US in the 1980s following many decades of income convergence. This paper establishes the same pattern of divergence for median family income in the 1980s and argues that regional specialisation in producer services contributed to upward divergence of regions with above average income. Because producer services are concentrated in cities, the growth of median household income in the 51 largest US cities over the 1980s is analysed, for all households and for black households. Regression results indicate that cities more specialised in producer services at the beginning of the decade had much better growth than cities more specialised in manufacturing. The results for black households were very similar to the results for all households.