Catching Up or Falling Behind?

Historically, average income in rural areas of the United States has been lower than in urban areas but has grown at a faster rate. If income growth is high enough, income in rural areas could “catch up” or converge over time with urban areas. In recent years, however, average rates of business and population entry and exit have declined across the United States and more so in rural and small urban areas, so rates of income convergence may also have slowed. Jason P. Brown and Bobby Beckemeyer investigate income growth and convergence in rural and urban areas over the past 50 years. They find that while income in lower-income counties tended to grow faster than in higher-income counties, this “catch-up” effect was significantly higher in rural areas from 1970 to 2010. Moreover, rural counties saw higher rates of income growth and convergence than urban counties regardless of whether they were adjacent to urban counties. However, income convergence in rural areas has slowed over time. From 2010 on, income growth and the rate of convergence were no longer significantly higher in rural counties than urban ones. Thus, the relative gap between average rural and urban incomes is likely to persist unless these trends reverse.