Income inequality, urban size and economic growth in OECD regions

On November 25th 2014 the results of the project “Income inequality, urban size and economic growth in OECD regions” were presented at the OECD headquarters in Paris . The purpose of this work, developed by AQR-IREA members Vicente Royuela and Raul Ramos together with Paolo Veneri (OECD), is to understand how income inequality is associated with economic growth in more than two hundred OECD regions and whether the degree and type of urban concentration affects this relationship. Both income inequality and urban concentration can be seen as patterns of resources allocation that are particularly interlinked at regional level. Econometric results show that, at least for the short period under consideration, there is a general negative association between inequalities and economic growth, especially since the start of the economic crisis. This relationship is sensitive to the type of urban structure. Higher inequalities seem to be more detrimental for growth in large cities, while regions characterised by small cities and rural areas are less affected.

The working paper can be downloaded here.