Are inequality and poverty harmful for economic growth: Evidence from the Metropolitan Areas of the United States

This article explores how initial income inequality and poverty are related to subsequent economic growth in the metropolitan statistical areas (MSAs) of the United States. In contradiction to many recent findings based on cross-country regressions, the results of this investigation show a robust positive relationship between initial (1980) MSA income inequality and subsequent MSA per capita personal income (PCPI) growth rate. Initial MSA poverty rate, on the other hand, is negatively associated with MSA PCPI growth rate. But this relationship is not statistically significant in some of the regressions. The results also show that MSAs with higher PCPI growth rates have lower end-of-period poverty and inequality; hence, there may exist a virtuous cycle of poverty reduction and economic growth. A by-product of this study is the compilation of a dataset on MSA income inequality and poverty for the years 1980 and 1990.