The Correlation Between Income Inequality and per Capita GDP in Georgia’s Counties

We use Reiterative Truncated Projected Least Squares (RTPLS) to estimate the correlation between real GDP per capita and income inequality for the 159 counties in Georgia, USA, from 2011 to 2021. RTPLS produces a separate slope estimate for every observation (data point), where differences in these slope estimates are due to omitted variables. Our measure of inequality is the ratio of household income at the 80th percentile divided by income at the 20th percentile. We find that the negative marginal correlation between income inequality and real per capita income has strengthened over time, and there are large differences between the effects for different counties. For example, in 2021, our estimate for d(real per capita GDP)/d(income inequality) ranged from −3.70 to −28.48. We find that this estimate becomes more negative when there are increases in the percentage of the county population with some college education, the percentage of the county population that is Black, the percentage of the county population that is Hispanic, as well as when unemployment increases. However, d(real percapita GDP)/d(income inequality) becomes less negative as the percentage of the county that is rural increases and as the percentage of the population that is less than 18 years old increases.