Interstate Income Inequality in the United States: Measurement, Modelling and Some Characteristics

Five points are made in this study. First, using a well‐recommended measure, interstate income inequality is reported for each year from 1950 through 1989, and its very small magnitude is pointed out along with the U‐shaped profile. Second, it is shown that a simple quadratic‐form model fits the data extremely well. Third, inequality indices for 1977 and 1988 are recomputed after adjusting for interstate price‐level variations, and large reductions in the indices, and a virtual disappearance of the increase in inequality after 1978, are noted. Fourth, a simple decomposition shows that income changes account for most of the inequality change in each decade. Last, states that have contributed most to inequality are identified.