Income Non-Convergence and Rural-Urban Earnings Differentials: Evidence from North Carolina

Considerable attention is currently focussed on the deteriorating social and economic condition of America's communities. Stagnant or worsening poverty rates, unemployment rates, and real incomes over the past decade-along with persistent and widening gaps between the economic performance of and urban areas-are well-documented indicators of the seriousness of this socioeconomic malaise [6; 8; 18]. Coming as it has after a period of relative prosperitythe so-called rural renaissance of the 1970s-the current crisis in America has generated a great deal of consternation among policymakers, social scientists, and other students of development. Current concerns over economic decline coincide with the observation by a number of researchers that the spatial dispersion of income--measured by the variance of income or earnings per capita across geographic units-has increased over the past decade or so. This pattern of income non-convergence has been observed across countries [1], regions of the U.S. [3], and states [5], and is distinctly at odds with the theoretical predictions of standard neo-classical growth theory. A considerable recent literature that accounts for the effects of schooling, human capital accumulation, learning by doing, and endogenous technical change within the context of endogenous growth models seeks to generalize the standard growth model and clarify the conditions under which incomes may be expected to converge or diverge over time [2; 14; 17]. In fact, the recent increase in dispersion of income per capita and the widening disparity in the economic performance of and urban areas appear to be related phenomena. Consider Figure 1, which plots measures of income dispersion and rural-urban income differentials over time for North Carolina's 100 counties. There it will be observed that the coefficient of variation