Short‐Run Dynamics of Income Disparities and Regional Cycle Synchronization in the U.S.

Abstract

Since the 1990s, the issue of regional income convergence and its long-term tendencies has been thoroughly and heatedly discussed. Much less attention, however, has been devoted to the short-run dynamics of regional convergence. In particular, three important aspects have not yet been adequately addressed. First, it is indeed essential to understand whether regional disparities manifest a tendency to move systematically along the national cycle. Then, if this happens to be the case, it becomes crucial to know whether 1) these movements are pro-or counter-cyclical,2) the cyclical evolution of the disparities is a consequence of differences in the timing with which the business cycle is felt in regions or it is motivated by the amplitude differences across local cyclical swings. In this paper, we shed light on these issues using data on personal income for the 48 coterminous U.S. states between 1969 and 2008. Our results indicate that income disparities do not move randomly in the short run but follow a distinct cyclical pattern, moving either pro-or counter-cyclically depending on the period of analysis. These patterns are probably explained by the changes in the direction of capital and labor flows that favor developed or poorer states in different periods. As for the underlying mechanism, it appears that the short-run evolution of the disparities in recent years is largely a consequence of differences in the timing with which the business cycle is felt across states rather than the outcome of amplitude differences across local cyclical swings.

Economic resilience and regionally differentiated cycles: Evidence from a turning point approach in Italy

“…Regional business cycles are important and may exhibit far different evolutions from the national one. A number of researchers have found significant differences across the turning points of US regional economies (Duran, 2014; Magrini et al, 2013; Owyang et al, 2005). The differences across regional cycles as well as between the regional and national one (a‐synchronicities) are often attributed to large dissimilarities in industrial structure (Krugman, 1991), inadequate financial and trade linkages (Frankel & Rose, 1998; Imbs, 2004; Kalemli‐Ozcan et al, 2001), and the differences in labour market characteristics (Duran & Ferreira‐Lopes, 2017).…”

“…Indeed, only a small number of papers have focused on regional turning points, most of which focus on concordance, diffusion, and synchronization of the regional cycles with each other and with the national business cycle. Owyang et al (2005), Hall and McDermott (2004), Duran (2014), and Magrini et al (2013) represent some examples of this stream of scholars who analyse states in the US (except Hall & McDermott, 2004, who focus on regions in New Zealand). Only Sensier et al (2016) have conducted an analysis for Europe, finding that regional cycles in Europe are inhomogeneous, although their analysis is constrained by annual data and does not look to region‐specific determinants, nor specific policy implications.…”

Regional disparities in Mexico and the spatially cumulative effects of national development and economic cycles, 1940–2013

“…A related strand of the literature deals with the question of whether regional imbalances expand or contract when the national economy expands or contracts (Aoki c, Fröhlich, & Raši c Bakari c, 2016;Engin Duran, 2014;Magrini, Gerolimetto, & Engin Duran, 2015;Petrakos, Rodríguez-Pose, & Rovolis, 2005;Petrakos & Saratsis, 2000;Rodriguez-Pose & Fratesi, 2007). Berry suggests that surges in economic growth are linked to increasing regional disparities, implying that polarization reversal is a feature of economic slowdowns.…”

“…Regional disparities and their short-and long run variations have extremely important implications for regional economic policy. But the necessity and the type of intervention in the short run is likely to be different from the response aimed at addressing inequalities in the long run (Engin Duran, 2014). Mexico represents a very powerful example regarding historical regional uneven development, however, the increasing regional disparities in the export-oriented industrialization phase has not been a prominent issue on the national policy agenda.…”

Employment volatility in lagging and advanced regions: The Italian case

“…Moreover, it represents desired property that it directly smooths the series and estimate a long run trend. Then calculated are the deviations of data from the trend, so that the growth cycle is measured (Buch et al, 2004;Buch & Shoettler, 2013); Duran, 2014). It is known in the literature to be accurate, simple, and intuitive.…”