Per Capita Income Growth and Disparity in the United States - 1929-2003

Sep 21, 2026

Per capita income in the United States rose by more than fivefold between 1929 and 2003, while income disparity across states declined over the same period. Economic growth models suggest that regions that are similar in fundamentals tend to converge as resources flow to highest-valued uses, equalizing income per capita through labor and capital movements. Within one country, shared constitutional and market conditions make convergence easier to observe, though a persistent rich-poor gap remains.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages5

Reading Time13 min

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Per Capita Income Growth and Disparity in the United States, 1929-2003

Income Per Capita

Disposable Income Per Capita

by Paul Gomme and Peter Rupert 已conomicgrowth has led to everhigher standards ofliving over the past75 years.Average real per capita incomein the United States has grown by morethan a factor of five since 1929.Everystate has seen a rise in its real per capitaincome.Over this same time span,thedisparity in income across the states hasalso declined,and appears to continue todo so. Standard models of economic growthconclude that for regions that are “simi-lar”(imagine they are exactly the sameexcept in their initial level of income orcapital),economic forces will tend todrive the regions to become more equalin terms of income per capita,that is,they will tend to converge.Of course,there may be different political systems,differences in property rights,tax struc-tures,and so on,across regions that canimpede the economic forces leading toequality.Such differences make it diffi-cult to draw conclusions regarding whathas become known as economic“con-vergence." Identifying and characterizing conver-gence is much easier to do within acountry.One would not expect the statesof the United States to be very dissimilarin terms of the underlying environmentThat is,each state is protected by thesame constitutional laws on property,human rights,freedoms,and so forth.There are no tariffs or labor laws pre-venting the movement of goods,capital,or labor to and from states.There hasbeen no civil war for more than 130years.Looking across the states,it isevident that income disparity hasdeclined;however,there still remains afairly wide gap between the richest andpoorest states.This persistent gap shows # Per Capita Income Growth and Disparity inthe United States,1929-2003 that even within the same country,con-vergence tends to take a very long time.The idea of convergence relies on thefact that resources will flow to theirhighest valued use.If,for example,somestates have more and better capital,laborshould flow to them to take advantage ofthe higher wages that would result.Thismovement of labor works to reduce thedisparity in wages across the tworegions.As more workers flow into aregion,wages there will start to fall.Thewages in the regions that are losing laborwill rise as workers become more scarce.Similarly,if some states have lowertaxes on income,one would expect thatlabor and capital might move to suchstates.Market forces would again workto equalize rates of return to labor andcapital.Of course,no one in the UnitedStates worries that if a manufacturingfacility is erected in some state that stateor local authorities will confiscate thecapital.That is,there is no risk premiumfor locating in some states rather thanothers.This is not true for some coun-tries around the world. This Economic Commentary documentshow the United States has changed overthe last three-quarters of a century interms of income per capita.An analysisshows that real income per capita isgrowing over time and is convergingacross states. ## ■ Income Per Capita To be sure,real income per capita in theUnited States has grown substantiallyover the past three-quarters of a century.In 1929 the average income per capitawas nearly $6,000.In 2003 averageincome per capita was roughly S30,000.(To make the income numbers compara- August 15,2004* Economic theory says the averageincome of different regions shouldgrow closer over time.Within theUnited States and across some of thericher countries,evidence suggests thisis true. ble between 1929 and 2003,they havebeen converted to year-2000 dollars.) In 1929,the richest state in the unionwas New York(with per capita incomeof S9,717).Figure 1 shows how the otherstates compared to New York in thatyear.The poorest state at the time wasSouth Carolina,where per capita incomewas S2,282.So the richest state wasmore than four times richer than thepoorest state.Moreover,20 of the 48states had incomes that were less than50 percent of the richest state. Turn the clock forward to the year 2003.Certainly a lot has changed.So,too,hasth

FAQs

What happened to U.S. per capita income from 1929 to 2003?

Average real per capita income increased substantially, with the document noting growth by more than a factor of five since 1929 and continued improvement through 2003.

How does economic theory explain convergence across states?

If regions start with different income levels but are otherwise similar, economic forces push them toward equality because labor and capital flow to where returns are highest, reducing wage and return gaps over time.

Does convergence eliminate income differences between the richest and poorest states?

No. The document shows that disparity declined, but a fairly wide persistent gap still remains between the richest and poorest states, implying convergence can take a very long time.

Sep 21, 2026

Uploaded by Olivia Brown