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Title: Poverty, Inequality and Cost of Living Differences

Citation Type: Working Paper

Publication Year: 2010

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Abstract: Metropolitan areas in the US are characterized by enormous differences in average income, earnings, and factor productivity. The income of individuals located in metropolitan areas at the top of the income distribution is more than double the income of observationally similar individuals located in metropolitan areas at the bottom of the distribution. These differences reflect, at least in part, variation in local productivity. Metropolitan areas in the US are also characterized by enormous differences in cost of living. These differences in cost of living are mostly due to differences in the cost of land and therefore housing. For example, the average cost of housing in metropolitan areas like Anniston, AL or Decatur, AL is about half of the average cost of housing in metropolitan areas like Naples, FL or Atlanta, GA. The existing data on average income by city or state do not take into account these cost of living differences, and therefore provide a potentially inaccurate picture of the geographical distribution of households with a low standard of living. Additionally, even within a metropolitan area, different income groups may be exposed to different price levels, if for example, retailers are less available in poor areas, or if the poor have higher search costs because of lack of transportation. Also, to the extent . . .

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Authors: Moretti, Enrico

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Publication Number: 2010-07

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other, Poverty and Welfare

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