This paper investigates why the level of income inequality differs across U.S. cites. We also
explore why some cities experienced faster increases in the level of inequality than others.
Using the Decennial Census and the American Community Survey (ACS) from 1980 to 2011,
we explore whether the disparities in the level and the changes in the level of inequality can
be explained by MSA characteristics, including labor market conditions, skill distribution,
residential mobility, racial concentration, industrial composition and unionization. We also
examine how state level policies such as unemployment insurance benefits and minimum
wage level is associated with income inequality.
Our findings hows that negative labor market conditions, concentration of skilled workers
and racial segregation are positively associated with the level of income inequality. The level
of inequality in these cites also tends to rise grow at a faster pace. While differences in the minimum
wage level do not seem to have any association with income inequality across cities, we find some evidence that differences in unemployment insurance benefits and greater unionization lowered increases in the income inequality.