UNDERSTANDING INEQUALITY AT

THE RIGHT SCALE

ERSA Congress Groningen 31 August 2017

Paolo Veneri

OECD

A comparative approach in OECD countries

Growing (income) inequality in the last two decades in

OECD countries

• Average Gini coefficient in the OECD area was 0.316 in 2014

against 0.301 in the mid 1990s

• Nationally, income inequality has increased in 13 out of 21 countries

(uneven inequality trends across countries)

• In emerging economies, though poverty has fallen in many cases,

income inequality remains significantly higher than among the most

unequal OECD countries.

• National averages mask important heterogeneity across places

Inequality between and

within regions

Source: Bartolini, D., S. Stossberg and H. Blöchliger (2016), "Fiscal Decentralisation and Regional Disparities", OECD Economics Department Working Papers, No. 1330, http://dx.doi.org/10.1787/5jlpq7v3j237-en.

Convergence of countries vs.

divergence of regions in the OECD

GDP per capita dispersion

is now greater within

countries than between

countries

4

Over the last decade inter-regional gaps have grown

in safety, income and environment and decreased in

education and access to services

Regional gaps in all

OECD countries in

well-being outcomes

(Theil index)

Beyond inter-regional disparities, income inequality is high within

regions: in some states in Mexico and United States and in Chilean

provinces Gini is much higher than the one in the country as a whole

Gini index in disposable income

(each point is the Gini index of disposable income of a region)

Source: OECD (2016), OECD Regions at a Glance. OECD Publishing, Paris

After the crisis, less unequal regions experienced a

relatively stronger economic growth

- Negative correlation between

income inequality and

subsequent GDP pc growth

after the economic crisis

- This relationship is relatively

stronger for more urbanised

regions (where inequality levels

are relatively higher)

Source: Royuela, Veneri, Ramos

(2014)

Inequality in cities

Are cities growing inclusively ?

9

On average, household incomes are 18% higher in

metropolitan areas than elsewhere

10

Metropolitan vs. non metropolitan household disposable income ratio by country

per equivalent household; 2014 or latest available year

Source: OECD (2016) Making cities work for all; OECD Publishing, Paris.

But in many countries cities are also more unequal

11

Gini coefficient of household disposable income, 2014

Source: Boulant, J., M. Brezzi and P. Veneri (2016), "Income Levels And Inequality in Metropolitan Areas:

A Comparative Approach in OECD Countries", OECD Regional Development Working Papers, No.

2016/06, OECD Publishing, Paris.

DOI: http://dx.doi.org/10.1787/5jlwj02zz4mr-en

There are large disparities in income inequality among

metro areas

12

Gini coefficients for household income in metropolitan areas, circa 2014

Metropolitan areas with minimum and maximum Gini coefficients, by country

Calgary Miami

Tux tla Gutiérrez

Brussels

Santiago

Paris

BariMalmö

GrazCopenhagen

Oslo

Québec

Albany

Rey nosa

Gent

Concepción

Saint-Etienne

Catania GöteborgLinz

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

CAN (11) USA (70) MEX (33) BEL (4) CHL (3) FRA (15) ITA (11) SWE (3) AUT (3) DNK (1) NOR (1)

Gin

i coeffi

cie

nt

for

hous

ehol

d d

isposa

ble

inco

me

Country (No. of metropolitan areas)

Maximum Minimum Country average

Larger cities are on average more unequal

13

Metropolitan population and income inequality, circa 2014

Metropolitan size and inequality, once controlled for income levels and country effect

Brussels

Antw erpen

Liège

Red Deer

Calgary

Lethbridge

Thunder Bay

Québec

Trois Rivières

Montreal

Sherbrooke

Toronto

Brant

Windsor

Iquique

Antofagasta

Calera

San Antonio

Rancagua

Linares

Temuco

Osorno

Punta Arenas

Paris

Toulouse

Saint-Etienne

Rouen Roma

Milano

Napoli

Tijuana

Hermosillo

Rey nosa

Torreón

León Guadalajara

Pachuca de Soto

Mex ico City

Toluca

Oslo

Malmö

Portland

Buffalo

Albany

Boston

Clev eland

Omaha

New York

Philadelphia

Denv er

Cincinnati

Washington

San Francisco

Fresno

Las Vegas

Albuquerque

Memphis

Los Angeles

Atlanta

Dallas

Houston

Miami

McAllen

0.05

0.1

0.15

0.2

0.25

10 11 12 13 14 15 16 17

Gin

i co

effi

cie

nt

(co

mp

one

nt p

lus r

esid

ua

ls)

City population (natural logarithm)

Metropolitan areas concentrate highly skilled people

14

Share of working-age population with tertiary education, 2012

Source: OECD (2016) Making cities work for all; OECD Publishing, Paris.

Fragmented Governance is correlated with higher

inequalities in cities

15

Fragmented metropolitan governance might foster segregation at the level of local units.

-.05

0

.05

.1.1

5

Ine

qu

alit

y b

etw

een

loca

l ju

risd

ictio

ns,

(C

om

po

ne

nt p

lus

resi

dua

l)

0 .2 .4 .6 .8 1

Administrative fragmentation

Controlling for country

fixed effects and other

city characteristics

(i.e. income ,

population, spatial

structure), higher

administrative

fragmentation is

associated to higher

spatial segregation by

income in different

municipalities

(cf. Brezzi, Boulant &

Veneri, 2016)

• Spatial segregation: the geographical over-concentration of households with a similar income level

• The concentration of similar households in space is a natural phenomenon.

– Spatial segregation can foster positive externalities for those living in affluent and high quality neighbourhoods (Morrison, 2015)

– Growing up in an area where disadvantages are concentrated can be a life-long obstacle to opportunities available (Chetty & Hendren, 2015)

High inequality within cities can translate in

high level of spatial segregation

Levels of income segregation vary strongly across

OECD metropolitan cities – even within countries

Acapulco de Juárez

Dublin

Aarhus

Amsterdam

Brisbane

Auckland (AU)

Hamilton

Rotterdam

Tshwane

Ejsberg

Marseille

Gold Coast

Brasilia

Cariri

Emufuleni

Manchester

Bradford Rennes

Monterrey

Vancouver

Memphis

Portland

0

0.05

0.1

0.15

0.2

0.25

BRAUSAZAFGBRCANMEXDNKFRANLDAUSNZLIRL

Entropy index

In most of the observed countries the rich are

more segregated than the poor

1. Inequality goes beyond income: Adopt a multi-dimensional well-being metrics to design policy at the regional and urban scale

2. Inequality in cities also means spatial segregation

• Appropriate governance systems of metropolitan areas can reduce the cost of administrative fragmentation

• Housing, transport and public service provision should be integrated to reduce the bad sides of segregation

• Design policy at the relevant scale (beyond administrative boundaries)

How to tackle inequalities in cities?

Design policy through an integrated approach in key

policy domains (i.e. housing, spatial planning, transport,

education), at the right scale (beyond administrative

boundaries) and based on a metrics that account for

people's well-being

One-sentenced message for policy

makers at local level

References

Ahrend, R., Gamper C., Schumann A. (2014), The OECD Metropolitan governance survey. OECD Regional Development Working Papers , 2014/04. Boulant, J, Brezzi, M., Veneri, P. (2016), Income levels and inequality in OECD metropolitan areas. A Comparative Approach in OECD Countries”, OECD Regional Development Working Papers, 2016/06, OECD Publishing, Paris. http://dx.doi.org/10.1787/5jlwj02zz4mr-en OECD (2015), The Metropolitan Century. Understanding Urbanisation and its Consequences, OECD Paris. OECD (2016) ,Regions at a Glance 2016, OECD Publishing. http://dx.doi.org/10.1787/reg_glance-2016-en OECD (2016), Making Cities Work for All, OECD Publishing. http://dx.doi.org/10.1787/9789264263260-en OECD (2012), Redefining “Urban”: A New Way to Measure Metropolitan Areas, OECD Publishing. Royuela, V., P. Veneri and R. Ramos (2014), “Income Inequality, Urban Size and Economic Growth in OECD Regions”, OECD Regional Development Working Papers, 2014/10, OECD Publishing. Veneri P. (2017) “Urban Spatial Structure in OECD Cities: is Urban Population Decentralising or Clustering?”, Papers in Regional Science Veneri, P., Ruiz, V. (2016), “Rural-to-urban population growth linkages: evidence from OECD TL3 regions. Journal of Regional Science, Vol. 56(1), pp. 3-24.

5. Spatial inequality within metropolitan areas Both overall and between-units inequality have increased in most cases

22

Theil index of household disposable income in some capital metropolitan areas and its between component, around 2000 and 2013