Rising land values and the post-1978 growth-inequality relationship

Since the late 1970s, the United States has experienced a sudden change from a positive relationship between growth and inequality to a negative one. This paper suggests that the rise in land values lies behind this. To demonstrate this hypothesis, I perform a set of panel structural vector autoregressive models with heterogeneous dynamics, using a comprehensive dataset of the United States at the state level. The estimation results highlight that the rapid growth in land values over the last four decades has rarely contributed to the productive capacity of the economy (resulting in falling growth) but instead has aided to the pursuit of personal enrichment by the wealthy (leading to increasing inequality).