A comparative analysis of income distribution in U.S. metropolitan areas

Economic growth is defined as the increase in the amounts of goods and services produced. While the growth of U.S. national income has gotten a lot of attention in the national media in recent years, equally important is the distribution of this national income among U.S. citizens and how this distribution varies across different metropolitan areas within the U.S.

The measure that is most often used by economists to determine income distribution is the Lorenz curve and the measure that is most often used to determine the equality of this income is the Gini coefficient. The Lorenz curve shows the proportion of national income earned by a certain amount of population. The further away the Lorenz curve is from the perfect line of equity, the more unequal the distribution of income. The ratio of the area between the Lorenz curve and the linear line over the area of the half square under the diagonal represents the Gini coefficient. The Gini coefficient can be a number between 0 and 1; the latter denoting perfect equality and the former denoting perfect inequality.

In this paper we use data from the Local Market Audience Analyst to compute the Gini Coefficient for several large and small metropolitan areas across the breadth of the U.S over a ten year time span.  We are able to compare not only the distribution of income across different U.S. metropolitan areas, but the change in this income distribution over time as well.  Included in our analysis are such large areas like New York City on the East Coast, Los Angles on the West Coast, Chicago in the Midwest, and small cities such as Rochester NY, Toledo OH, and Omaha, NB.  We then see if income equitability is either positively or negatively correlated with the economic growth of a particular metropolitan area.