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 Growth Substitute Equality Growth 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 InequalityGrowth 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 = , b 1 = 133.2, R 2 =.76

t = , b 1 = 0.125, R 2 =.82

t = 7.817, b 1 = , R 2 =.53

- Gini coefficient - Income The relationship between growth and inequality:

t = , b 1 = 1.86E-05, R 2 =.65

The spatial distribution of growth: - Income - Population growth - Socio-economic rank - Self-employment - Unemployment

t = -4.20, b 1 = , R 2 = Total (15.57) 8 (13.43) km 25 8 (13.43) 17 (11.57) 0-50 km Total Income <6,000 NIS Income >6,000 NIS

t = , b 1 = , R 2 =.18

Total km0-50 km 27 8 (14.50) 19 (12.50) Rank (14.50) 6 (12.50) Ranks Total 2  t = , b 1 = , R 2 =.20

t = , b 1 = , R 2 =.38

t = 5.330, b 1 = 0.028, R 2 =.35

The spatial distribution of inequality - Gini coefficient - Distance

t = , b 1 = , R 2 =.20

Discussion Decrease inequality Increase growth X Developed economy X Developing economy Income per capita Inequality Growth and inequality (between countries)

Growth and inequality (between regions, within a country) Decrease inequality Increase growth X Central region X Peripheral regions

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