Paper Regional Prosperity and Its Spillovers

Variation in annual per capita personal income across metropolitan areas leads variation in the same direction in house prices, rents, non-shelter inflation, and population. Compression across areas of long-term non-shelter inflation and growth rates of personal income suggest the workings of what we call area arbitrage. Area arbitrage is also a potential explanation for our most interesting result: large differences across areas in long-term population growth are unrelated to long-term differences in growth rates of personal income, house prices, rents, and prices of non-shelter goods and services.

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