Geographical Income Polarization

In this paper we estimate the degree, composition and development of geographical income polarization based on data at the individual and municipal level in Denmark from 1984 to 2002. Rising income polarization is reconfirmed when applying new polarization measures, the driving force being greater inter municipal income inequality. Counter factual simulations show that rising property prices to a large part explain the rise in polarization. One side-effect of polarization is tendencies towards a parallel polarization of residence location patterns, where low skilled individuals tend to live in cheaper areas, and highly skilled individuals in more expensive areas. This may threaten cohesion in the extensive universal welfare state of Denmark.