Inequality, does state level analysis show impact on development: A study of New Jersey

There are probably as many research papers that show that income inequality has deleterious impacts on both economic development and poverty, as there are papers which show no impact. Most of these studies are based on cross sectional analyses of national and international data. We address two questions in this study. One is whether or not there is significant impact at the state level. The other is whether different measures of inequality are instrumental in showing impact or lack thereof in the analysis of inequality on economic development/welfare.

Many economic phenomena which occur nationally or internationally, have their real impact on people’s lives at the local and state levels. It is of much relevance that studies be made of the variations at these levels.

We address the two questions above in this study. Economic Growth is only one factor in Economic Development. Other factors may include infant mortality, infrastructure development and upkeep, education, strength of institutions and poverty alleviation. In this study, we would include all but institutions in our analysis. Institutions will be considered in a different study. We analyze median and mean family income shares in New Jersey for the 50 years of 1964 to 2014, studying what relationship these shares have with economic development and poverty levels in the state. Various measurements of income distribution are also evaluated to determine what effect these may have, individually, to the significance of the relationships.

The study uses data from 1964 through 2014 of household incomes in New Jersey, derived from the March CPS Data of the US Bureau of the Census, stored in IPUMS (Integrated Public Use Microdata Series) . Data is also analyzed from the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA). There will be graphical as well as multiple regression analyses of the time series data over the long period studied.

We expect this study to demonstrate significant relationships between Income Distribution and both Development and Poverty, in New Jersey. It is hoped additionally that there are, at the state level, different impact conclusions which could be derived by using different measures of income distribution.