A Puzzle of High-Tech and Income Distribution

James Galbraith and Travis Hale published an intriguing paper that suggests that a few counties with the greatest high tech growth account for all the in the degree of inequality between counties. I asked Jamie how much of result might be due to the fact that people migrate to the affluent areas to take advantage of the lifestyle there, while pricing out of the market poor people.  What I saw of San Francisco seemed to confirm my suspicion.  If so, what Jamie might see is a sorting process overlaying the technology boom.

I cannot prove my suspicion. The data in his paper looks reasonable. All I have is my intuition, which is often fallible.

Any thoughts?

Galbraith, James K. and Travis Hale. 2004. “Income Distribution and the Information Technology Bubble.” utip.gov.utexas.edu/abstract.html#UTIP27.

“The period from 1994 to 2000 marks the period of largest

inequality growth, a 48% increase in the between-county index.”

“We know that technology firms are not distributed uniformly, but are clustered in centers such as Silicon Valley, Seattle, North Carolina’s Research Triangle, Austin, and Boston’s Route 128 Corridor.”

“Thirty-seven of the CNET Tech Index companies are headquartered in counties that were among the top-10 largest losers in Theil Index element from 2000 – 2001, including Santa Clara County. Forty-six of the eighty CNET companies are headquartered in the fifty counties that had the largest decreases in their Theil elements from 2000 to 2001. The ten counties that saw their Theil element gain the most from 2000 to 2001 host headquarters for 11 CNET Tech Index firms.”

“A thought experiment along these lines might ask, what would have happened if four hi-tech counties (Santa Clara, San Mateo, and San Francisco Counties in California and King County, Washington) had not seen per capita incomes explode, but had instead experienced more moderate growth? The results are quite impressive. Substituting per capita incomes for these 4 counties that grow along with the average nationwide increase in per capita income from 1994 – 2000 — an average of 4.7% per annum — results in an aggregate inequality curve that is basically flat …. These four counties are so important to the between-county Theil index, in other words, that their income changes drive the aggregate figures that sum over 3100 counties.”

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