Spatial inequality refers to the unequal distribution of income and resources across geographical regions. Attributable to local differences in infrastructure, geographical features (presence of mountains, coastlines, particular climates, etc.) and economies of agglomeration, such inequality remains central to public policy discussions regarding economic inequality more broadly.
Whilst jobs located in urban areas tend to have higher nominal wages (unadjusted for differences in price levels or inflation) than rural areas, the cost-of-living and availability of skilled work correlates to regional divergences in real income and output. Additionally, the spatial component of public infrastructure affects access to quality healthcare and education (key elements of human capital and worker productivity, which directly impacts economic well-being).
Variation in both natural resource composition and quality of regional infrastructure are traditionally considered to be motivating factors for migration patterns between urban cities and rural areas. This, in turn, impacts the concentration of specific industries and sectors within a given area, as well as the investment choices made by local governments, thus perpetuating spatially-based disparities. However, there remain significant challenges in carrying out empirical research to quantify these disparities (particularly within a given nation, as opposed to across different nations), due to lack of region-specific datasets, the level of geographical disaggregation required to reveal such trends, as well as the inherent differences in incomes and living costs across different communities.
Urbanization and economies of agglomeration
The relationship between
Population concentration and the clustering of particular industries also allows for the pooling of workers, which results in local business needs and workers' specific skillsets becoming better aligned. Such specialization also allows for knowledge spillovers and greater exchange of ideas, as similar firms can more easily and dynamically interact with one another. This can assist in gaining a comparative advantage with respect to a particular industry or sector, which can be especially beneficial for realizing gains from trade when interacting with other communities and regions which are not as specialized, thus resulting in more geography-based disparities in economic activity.
Natural resources and geographical features
Natural resource availability affects industry prevalence, as economic activities which are heavily dependent on specific natural resources tend to cluster around suitable geographical regions and climates.
Localities which have a heavy reliance on agricultural jobs require favorable climate conditions for crop production and harvesting.
Regions with access to strong transportation networks (including highways, railways, airports etc.) are more likely to benefit from external trade in comparison to remote regions. As transportation costs and logistics inform much of the clustering of economic activity within a region, the geographical concentration of particular industries informs the extent to which particular physical infrastructures must be developed and invested in to support the needs of specific localities.
Social infrastructural components, which impact health and education standards (hospitals, schools, public libraries, etc.) additionally influence quality-of-life conditions and the well-being of workers, and thus their choices with respect to selecting regions/ communities to live in. As such, city planning and the provision of public infrastructure and services remains essential to public policy considerations for rapidly urbanizing communities.
In particular, people living in regions with poor infrastructure and public services are at a greater risk of poor health and wellbeing. This includes limited access to both healthcare, as well as quality and nutritious food. Such impacts compound over time, leaving individuals to become more susceptible to future health problems and illnesses. For instance, the spatial patterns of such environmental factors and hospital accessibility can impact public health outcomes, such as COVID-19 infection, spread, and mortality rates within a nation.
Furthermore, as families of similar incomes tend to cluster, further segregation of socio-economic classes is propagated by schooling environments.
Investment choices, trade, and migration
As different communities may not have similar
There remains no academic consensus on whether trends in spatial inequalities over time are causes of region-based differences in income, or rather the symptoms of other socio-economic disparities. Furthermore, the complex and intertwined relationships between geographical features, urbanization, availability of infrastructure, and access to public resources further complicates empirical research.
Output and productivity
While nominal wages tend to be higher in cities and urban regions, the same is not necessarily true of real wages, as rising housing costs and expenses tend to offset these benefits.
The availability and reliability of local data remains a barrier to accurate estimation in academic studies. The typical limitations of econometric studies may also impact the soundness of empirical results and conclusions. As such, there remains no unified theory within economic geography to provide a broadly accepted causal explanation for spatial inequality.
In particular, an inherent difficulty in comparing urban and rural regions is the vast disparity in quality and variety of goods and services enjoyed by the typical household in either type of community. Furthermore, differences in disposable income and composition of spending pose further challenges to comparative approaches.
Whist the Gini coefficient and Theil index remain as popular income inequality metrics, these summary statistics do not allow for the decomposition of inequality into multiple dimensions, and thus are insufficient for the multi-faceted analysis required to study spatially dependent inequalities.
- Chakravorty, Sanjoy (2003 a), “Industrial Location in Post-reform India: Patterns of Inter-regional Divergence and Intra-regional Convergence”, Journal of Development Studies, Vol. 40, No. 2, pp. 120–52.
- Combes, Mayer and Thisse, Economic Geography: The Integration of Regions and Nations (Princeton University Press 2009)
- Deichmann, Uwe; Somik V. Lall; Stephen J. Redding and Anthony J. Venables (2008), “Industrial Location in Developing Countries”, The World Bank Research Observer, Vol. 23, No. 2, pp 219–46.
- Fujita, Masahisa (1996): “Economics of Agglomeration”, Journal of the Japanese and International Economies, Vol. 10, pp. 339–378.
- Fujita, Masahisa and Paul Krugman (2004): “The new economic geography: Past, present and the future”, Papers in Regional Science, Vol. 83, No. 1, pp. 139–164.
- Krugman, Paul (1991a), “Increasing Returns and Economic Geography”, The Journal of Political Economy, Vol. 99, No. 3, pp. 483–499.
- Lall, Somik V., Jun Koo and Sanjoy Chakravorty (2003): “Diversity Matters: The Economic Geography of Industry Location in India”, World Bank Policy Research Working Paper 3072, Washington DC.
- Lall, Somik V. and Sanjoy Chakravorty (2005), “Industrial Location and Spatial Inequality: Theory and Evidence from India”, Review of Development Economics, Vol.9, No. 1, pp. 47–68
- Wei, Yehua Dennis (ed.) (2015), "Spatial Inequality", Applied Geography, Vol.61, pp. 1-116.
- Romero, Jessie and Schwartzman, Felipe F. Inequality in and across Cities. October 2018, No. 18-10. Federal Reserve Bank of Richmond Economic Brief.
- Kim, Sukkoo. 2008. Spatial Inequality and Economic Development : Theories, Facts, and Policies. Commission on Growth and Development Working Paper;No. 16. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/28050 License: CC BY 3.0 IGO.
- “Lall, Somik V.; Selod, Harris; Shalizi, Zmarak. 2006. Rural-Urban Migration in Developing Countries : A Survey of Theoretical Predictions and Empirical Findings. Policy Research Working Paper; No. 3915. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/8669 License: CC BY 3.0 IGO.”
- Boulant, Brezzi, M., & Veneri, P. (2016). Income Levels And Inequality in Metropolitan Areas A Comparative Approach in OECD Countries / Justine Boulant, Monica Brezzi and Paolo Veneri. In Income Levels And Inequality in Metropolitan Areas A Comparative Approach in OECD Countries. OECD Publishing.
- Tanaka, Tomomi; Nuamah, Camille; Geiger, Michael (December 14, 2018). "Ghana's challenges: Widening regional inequality and natural resource depreciation".