Journal of Urban Economics
Vol. 102, Pages 76-90
The past thirty years have seen a dramatic decline in the rate of income convergence across states and in population flows to high-income places. These changes coincide with a disproportionate increase in housing prices in high-income places, a divergence in the skill-specific returns to moving to high-income places, and a redirection of low-skill migration away from high-income places. We develop a model in which rising housing prices in high-income areas deter low-skill migration and slow income convergence. Using a new panel measure of housing supply regulations, we demonstrate the importance of this channel in the data.
Shoag, Daniel, and Peter Ganong. "Why has Regional Income Convergence in the US Declined?" Journal of Urban Economics 102 (November 2017): 76-90.