Linking National and Regional Income Inequality: Cross-Country Data Harmonization and Analysis

Lead Research Organisation: London School of Economics & Pol Sci
Department Name: Centre for Economic Performance

Abstract

Our study focuses on income inequality in towns and cities within countries and how this has changed over time in five high-income countries. In recent years, academic research has highlighted the rise of income inequality, particularly the increase of top 1% income share, and the associated social, economic and political problems. It is becoming increasingly clear that these national income inequalities are driven in part by income inequalities within countries, with a divide between the 'superstar' global cities (London, Paris, New York) and 'left behind' ex-industrial towns. This is apparent in the rise of 'populist' politics, in which people living in economically declining places are feeling the pull of simplistic solutions to complex social and economic problems.

Governments and international organisations have become increasingly aware of the problems associated with national economic inequality, aided by existing research that provides evidence from different countries. To help governments find ways to spread prosperity more evenly across their towns, cities and regions, there is a need for internationally comparable evidence to show how different countries perform in terms of geographic inequalities.

The lack of consistent and comparable datasets on national inequality decomposed into sub-national regions has so far prevented the investigation of fundamental questions: What is the influence of growing disparities across and within local areas on overall inequality? Is it that a few 'superstar' cities are the main engines of country-level trends? Does the divergent evolution of national inequality across countries emerge from trends at the sub-national level? How are local costs of living in different areas evolving over time and across countries? What are the main geographic division lines in terms of income and economic activity within countries?

Our study will examine trends in geographic income inequality across five high-income countries - Canada, France, Germany, the United Kingdom and the United States - since the 1970s. We have brought together an international expert team of geographers with experience of studying geographic inequality and economists experienced in measuring national income inequality. The first objective of our research is to develop a method for analysing geographic income inequality in a way that can be compared between countries. We will tackle three big problems: defining comparable geographic areas, having consistent measures of income and adjusting incomes for the varied local cost of living (e.g. housing costs). We will use data from national tax records, from registries of workers' earnings and household surveys. Using this method, our second objective is to assess the importance of geographic inequalities in driving national income inequalities across our five study countries. Third, we will analyse the common trends and differences between and within countries, and investigate the causes of these trends. Our final objective is to use this project as the foundation of a global database that provides information about inequalities between places. Our vision is that this will act as a point of information for researchers to study the causes of geographic income inequality, and for governments to understand how their country compares to others.

Publications

10 25 50
 
Description Participation in ONS UK Population Theme Advisory Board
Geographic Reach National 
Policy Influence Type Participation in a advisory committee
 
Title Code for Dorn crosswalk method 
Description Open source R and Stata code to implement the method used by David Dorn to translate data published for US Public Use Microdata Areas to Commuting Zones. This allows users to recreate the Dorn method and also apply it to other time points and countries, as we intend to do for the UK and Germany. 
Type Of Material Data analysis technique 
Year Produced 2022 
Provided To Others? Yes  
Impact None as yet: we will be using this code to create crosswalks for 1975 'Areas' in the UK New Earnings Survey, as a step towards calculating the first measures of spatial inequality for functional economic areas for the 1970s and 1980s for the UK. This work will be completed in 2022. 
URL https://github.com/mfransham/puma-cz-cw-dorn-rep
 
Description Constructing measures of spatial income inequality for the US 
Organisation McGill University
Country Canada 
Sector Academic/University 
PI Contribution The contributions of the UK team was to: - create a link between the US PUMA area in the data and the preferable geographic unit for the analysis (Commuting Zone) - obtaine the US Census data - provide a detailed description of the data - produce a portion of the descriptive statistics - conduct robusntess checks of the preliminary results
Collaborator Contribution The contributions of the partners was to - develop a code for linking the US PUMA area in the data and the preferable geographic unit for the analysis (Commuting Zone) - produce a portion of the descriptive statistics - conduct robusntess checks of the preliminary results
Impact - a cross-walk between the US PUMA area in the data and the preferable geographic unit for the analysis (Commuting Zone) - a set of descriptive statistics describing the evolution of spatial inequality in the US
Start Year 2021
 
Description Constructing measures of spatial income inequality for the US 
Organisation University of Bonn
Country Germany 
Sector Academic/University 
PI Contribution The contributions of the UK team was to: - create a link between the US PUMA area in the data and the preferable geographic unit for the analysis (Commuting Zone) - obtaine the US Census data - provide a detailed description of the data - produce a portion of the descriptive statistics - conduct robusntess checks of the preliminary results
Collaborator Contribution The contributions of the partners was to - develop a code for linking the US PUMA area in the data and the preferable geographic unit for the analysis (Commuting Zone) - produce a portion of the descriptive statistics - conduct robusntess checks of the preliminary results
Impact - a cross-walk between the US PUMA area in the data and the preferable geographic unit for the analysis (Commuting Zone) - a set of descriptive statistics describing the evolution of spatial inequality in the US
Start Year 2021
 
Description Developing a common definition of income across countries 
Organisation McGill University
Country Canada 
Sector Academic/University 
PI Contribution The aim of the collaboration was to develop consistent and feasible measures of income, accounting for the local costs of living. My contribution was to: - provide expert knowledge on the UK administrative and survey data containing information on income; and regional data on the local cost of living indexes - propose a method for imputing missing components of income in the UK administrative and survey data - propose a method for estimating couple-split definition of income in the UK data - show preliminary descriptive statistics on income in the UK administrative and survey data
Collaborator Contribution The contributions of my partners were similar as mine, but focused on other countries. In particular: - provide expert knowledge on the FR/DE/CA/US administrative and survey data containing information on income; and regional data on the local cost of living indexes - propose a method for imputing missing components of income in the FR/DE/CA/US administrative and survey data - propose a method for estimating couple-split definition of income in the FR/DE/CA/US data - show preliminary descriptive statistics on income in the FR/DE/CA/US administrative and survey data
Impact - Establishing a common definiton of income across countries. We have specified income sources of interest; temporal aggregation of income; the method for imputing missing incomes; the method for spliting income across spouses - Presented preliminary descrpiptive statistics on the between- regional income inequlity across countries
Start Year 2021
 
Description Developing a common definition of income across countries 
Organisation University Paris Sud
Department University of √Čvry Val-d'Essonne
Country France 
Sector Academic/University 
PI Contribution The aim of the collaboration was to develop consistent and feasible measures of income, accounting for the local costs of living. My contribution was to: - provide expert knowledge on the UK administrative and survey data containing information on income; and regional data on the local cost of living indexes - propose a method for imputing missing components of income in the UK administrative and survey data - propose a method for estimating couple-split definition of income in the UK data - show preliminary descriptive statistics on income in the UK administrative and survey data
Collaborator Contribution The contributions of my partners were similar as mine, but focused on other countries. In particular: - provide expert knowledge on the FR/DE/CA/US administrative and survey data containing information on income; and regional data on the local cost of living indexes - propose a method for imputing missing components of income in the FR/DE/CA/US administrative and survey data - propose a method for estimating couple-split definition of income in the FR/DE/CA/US data - show preliminary descriptive statistics on income in the FR/DE/CA/US administrative and survey data
Impact - Establishing a common definiton of income across countries. We have specified income sources of interest; temporal aggregation of income; the method for imputing missing incomes; the method for spliting income across spouses - Presented preliminary descrpiptive statistics on the between- regional income inequlity across countries
Start Year 2021
 
Description Developing a common definition of income across countries 
Organisation University of Bonn
Country Germany 
Sector Academic/University 
PI Contribution The aim of the collaboration was to develop consistent and feasible measures of income, accounting for the local costs of living. My contribution was to: - provide expert knowledge on the UK administrative and survey data containing information on income; and regional data on the local cost of living indexes - propose a method for imputing missing components of income in the UK administrative and survey data - propose a method for estimating couple-split definition of income in the UK data - show preliminary descriptive statistics on income in the UK administrative and survey data
Collaborator Contribution The contributions of my partners were similar as mine, but focused on other countries. In particular: - provide expert knowledge on the FR/DE/CA/US administrative and survey data containing information on income; and regional data on the local cost of living indexes - propose a method for imputing missing components of income in the FR/DE/CA/US administrative and survey data - propose a method for estimating couple-split definition of income in the FR/DE/CA/US data - show preliminary descriptive statistics on income in the FR/DE/CA/US administrative and survey data
Impact - Establishing a common definiton of income across countries. We have specified income sources of interest; temporal aggregation of income; the method for imputing missing incomes; the method for spliting income across spouses - Presented preliminary descrpiptive statistics on the between- regional income inequlity across countries
Start Year 2021
 
Description Spatial units for comparative studies of geographic income inequality 
Organisation McGill University
Country Canada 
Sector Academic/University 
PI Contribution During 2021 we organised six project team meetings to discuss the adoption of a comparable set of geographic units that would enable comparison between our five study countries and over time. We contribute the organisation of these project meetings, research on criteria to evaluate these geographic units, calculation of evaluation metrics for UK geographies and research into US geographical units.
Collaborator Contribution Our partners in France, Germany and Canada contributed research into existing functional urban area geographies for their countries plus calculation of comparable evaluation metrics for each country and a number of candidate economic geography units.
Impact A working paper is currently being written to outline our evaluation and selection of these comparative geographies. The collaboration is multidisciplinary; the main disciplines involved are economics and geography.
Start Year 2021
 
Description Spatial units for comparative studies of geographic income inequality 
Organisation University of Bonn
Country Germany 
Sector Academic/University 
PI Contribution During 2021 we organised six project team meetings to discuss the adoption of a comparable set of geographic units that would enable comparison between our five study countries and over time. We contribute the organisation of these project meetings, research on criteria to evaluate these geographic units, calculation of evaluation metrics for UK geographies and research into US geographical units.
Collaborator Contribution Our partners in France, Germany and Canada contributed research into existing functional urban area geographies for their countries plus calculation of comparable evaluation metrics for each country and a number of candidate economic geography units.
Impact A working paper is currently being written to outline our evaluation and selection of these comparative geographies. The collaboration is multidisciplinary; the main disciplines involved are economics and geography.
Start Year 2021
 
Description Spatial units for comparative studies of geographic income inequality 
Organisation University of Paris-Saclay
Country France 
Sector Academic/University 
PI Contribution During 2021 we organised six project team meetings to discuss the adoption of a comparable set of geographic units that would enable comparison between our five study countries and over time. We contribute the organisation of these project meetings, research on criteria to evaluate these geographic units, calculation of evaluation metrics for UK geographies and research into US geographical units.
Collaborator Contribution Our partners in France, Germany and Canada contributed research into existing functional urban area geographies for their countries plus calculation of comparable evaluation metrics for each country and a number of candidate economic geography units.
Impact A working paper is currently being written to outline our evaluation and selection of these comparative geographies. The collaboration is multidisciplinary; the main disciplines involved are economics and geography.
Start Year 2021
 
Description Participation in roundtable with Shadow Treasury team 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Neil Lee (PI) was involved in a discussion with the Shadow Treasury team, with acknowledgment afterwards from Rachel Reeves MP
Year(s) Of Engagement Activity 2022
 
Description Presentation at CURDS Levelling up Seminar 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Presentation at a CURDS - MHCLG seminar on Levelling Up
Year(s) Of Engagement Activity 2022
 
Description Presentation at Conservative party Conference 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Neil Lee spoke at Conservative party Conference Panel, alongside George Freeman, on Levelling Up. Follow up included journalists and politicians
Year(s) Of Engagement Activity 2022
 
Description Roundtable with shadow employment team 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact We convened a session with the shadow employment team, including Alison McGovern MP and Karen Buck. We discussed regional inequalities in labour market participation and followed up to make links with other academics
Year(s) Of Engagement Activity 2022