Spatial Distribution of Growth and Inequality:The case of Israeli cities

Malka Antonio and Daniel Shefer

January 2010

Center for Urban and Regional Studies

Technion

Conflict (?) between two objectives

1. Induce growth

2. Reduce inequality

Competing or complementing objectives?

Equality

Gro

wth

Substitute

Equality

Gro

wth

Complementary

Research questions

Is there a spatial relationship between growth and inequality?

What are the factors that affect the spatial distribution of growth?

Does diversity have a role in the growth/inequality dynamic?

What is the spatial relationship between growth and inequality in Israel?

Growth is affected by: Innovation, specialization, trade The New Economic Geography

Growth – average income, population growth Distance from Tel Aviv

Human capital – education Entrepreneurship – self-employment ICT (Information and Communication

Technology) specialization Unemployment Inequality

The cyclical, self-reinforcing relationship between growth and inequality is mediated by diversity

Inequality Growth

Diversity

Increase

Decrease

Diversity

Diversity creates dynamic places (Jacobs) The Creative Class Economy (Florida) Quasi-fixed factors (World Development

Report, 2009) Ease of entry (Chinitz) Monopolistic competition (a la Chamberlin) –

Differentiated products/services and city size (Quigley)

Hypotheses

Diversity increases growth Growth increases inequality Diversity increases inequality within cities

and decreases inequality between cities/regions

Distance from the center affects income, education, entrepreneurship, population growth, unemployment

Empirical analysis

Stage I General trends for 2006

Spatial analysis

Stage II Growth and inequality over time Spatial ICT activities

The relationship between growth factors:

- Income- Education- Entrepreneurship – self-employment - Socio-economic rank

t = 12.742, b1 = 133.2, R2 = .76

Income vs. education

3,000

5,000

7,000

9,000

11,000

30.0 40.0 50.0 60.0 70.0 80.0Percent of students with high-standard degree

Ave

rag

e in

com

e

Localities

Modiin-M-R

Jerusalem

Kiryat Gat

t = 15.842, b1 = 0.125, R2 = .82

Socio-economic rank vs. education

0

2

4

6

8

10

30.0 40.0 50.0 60.0 70.0 80.0

Percent students with high-standard degree

So

cio

-eco

n r

ank

Localities

Modiin-M-R

Netivot

t = 7.817, b1 =- 0.004, R2 = .53

Rate of self-employment vs. average income

0.010.020.030.040.050.060.0

3,000 5,000 7,000 9,000 11,000

Average income

Sel

f-em

plo

ymen

t p

er 1

,000

Localities

Modiin-M-R

Eilat

Tel Aviv

- Gini coefficient - Income

The relationship between growth and inequality:

t = 10.010, b1 = 1.86E-05, R2 = .65

Gini coefficient vs. average income

0.3

0.35

0.4

0.45

0.5

0.55

3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000

Average income

Gin

i co

effi

cien

t

Localities

Modiin-M-Rt

Maale Adumim

Jerusalem

Tel Aviv

The spatial distribution of growth:

- Income- Population growth- Socio-economic rank - Self-employment- Unemployment

t = -4.20 , b1 = -17.65 , R2 = .25

0.01542925Total

2921

(15.57)8

(13.43)51-184 km

258)13.43(

17)11.57(

0-50 km

TotalIncome <6,000

NISIncome >6,000

NIS2

Average income vs. distance from TA

2,000

4,000

6,000

8,000

10,000

12,000

0 50 100 150 200

Distance (km from TA)

Av

era

ge

in

co

me

Localities

Modiin-M-R

Mevaseret Zion

Haifa

t = -3.322, b1 = -0.013, R2 = .18

Population growth vs. distance

-1.00.01.02.03.04.05.06.07.08.0

0 50 100 150 200

Distance (km from TA)

Po

pu

lati

on

gro

wth

Localities

Bat Yam Haifa

Modiin-M-R

Maale Adumim

Beit Shemesh

Nes Ziona

0-50 km51-184 kmTotal

Rank 6-919(12.50)

8(14.50)

27

Ranks 1-56(12.50)

21(14.50)

27

Total 2529540.001

2t = -3.625, b1 = -0.015, R2 = .20

Socio-economic rank vs. distance from TA

0

2

4

6

8

10

0 50 100 150 200Distance (km from TA)

So

cio

-eco

no

mic

ran

k

Non-metropolitan Metropolitan TA

I

IV III

II

Haifa

LodRamle

t = -5.717, b1 =- 0.119, R2 = .38

Rate of self-employment vs. distance

0.0

10.0

20.0

30.0

40.0

50.0

60.0

0 50 100 150 200

Distance (km from TA)

Sel

f-em

plo

ymen

t p

er 1

,000

Localities

Beit ShemeshBnei Brak

t = 5.330, b1 = 0.028, R2 = .35

Rate of unemployment vs. distance

13579

111315

0 50 100 150 200

Distance from TA

Un

em

plo

ym

ne

t p

er

1,0

00

Localities

Jerusalem

Zafed

The spatial distribution of inequality

- Gini coefficient- Distance

t = -3.655, b1 = -0.0003, R2 = .20

Gini coefficient vs.distance

0.3

0.35

0.4

0.45

0.5

0.55

0 50 100 150 200

Distance (km from TA)

Gin

i c

oe

ffic

ien

t

Localities

Haifa

Ramle

Zafed

Ramat Hasharon

Discussion

Increase growth

Decrease inequality

Developed economy X

Developing economy X

Income per capita

Ineq

ualit

y

• Growth and inequality (between countries)

Growth and inequality (between regions, within a country)

Increase

growth

Decrease inequality

Central

region X

Peripheral regions X

Conclusions The impact of inequality depends on scale –

within and between cities/regions Policy recommendations

Investment in transport infrastructure - Improves labor accessibility to the center Attracts firms to the periphery Induces spatial economic integration

Earmark location specific incentive programs to help distressed cities in the center as well as in the periphery