The Australian Economic Review, vol. 31, no. 1, pp. 3—26 ª The University of Melbourne, Melbourne Institute of Applied Economic and Social Research 1998 Published by Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA Abstract In this study we examine Australian census data on regional incomes for the period 1976— 91. Following a discussion of theories and em- pirical evidence regarding regional income adjustment, the regional dispersion of per cap- ita income is analysed for the six Australian states and at the sub-state level (statistical di- visions, SDs). The coefficient of variation is used as the measure of dispersion, and Gini co- efficients are also calculated to analyse income equality within regions. For Australia, the cross-state dispersion of per capita incomes in- creased over the period, whereas there was neither convergence nor divergence of incomes among Australias 57 SDs. In addition, the in- trastate dispersion of per capita incomes across SDs remained largely unaltered over the period. Gini coefficients indicated that across income strata, the distribution of in- comes both within states and within SDs has become more equal. 1. Introduction Regional disparities in the level of national economic development have often been an im- portant concern of governments, particularly those in large federal countries such as Canada, the United States and India. While there has been a good deal of research on income in- equalities among Australian individuals or families, a more sanguine view of regional income inequalities has been common in Aus- tralia, partly arising from early empirical evi- dence that the differences in mean per capita incomes across Australias regions (states) were among the lowest observed in a sample of developed and developing countries (William- son 1965), which seemed to confirm the egali- tarian ethos which was a feature of colonial government long before Federation in 1901. In this paper we examine the key theoretical determinants of regional per capita incomes, then summarise the main findings of the exten- sive empirical literature on cross-sectional studies of regional economic growth, and the much smaller literature analysing movements in Australian regional incomes. Using census data from state and sub-state regions (statistical divisions, SDs 1 ) on Australian regional in- comes, we examine trends in spatial per capita income inequality in Australian regions be- tween 1976—91. 2 Answers to three key ques- tions will be explored. First, has the dispersion of per capita incomes across the Australian states and across Australian SDs widened or narrowed in the period 1976—91? 3 Second, within each state economy, has the dispersion Disparities in Australian Regional Incomes: Are They Widening or Narrowing? Paul Cashin and Loris Strappazzon* Department of Economics, The University of Melbourne and Victorian Department of Natural Resources and Environment * The authors would like to thank without implication Mark Crosby, John Freebairn, Robert Hale, Donald Mac- Laren, Frank McClelland, Ian McDonald, Nilss Olekalns, Gary Stoneham and seminar participants at the Department of Natural Resources and Environment and the 1997 Aus- tralian Agricultural and Resource Economics Society Con- ference for their comments and suggestions. This paper was completed while Loris Strappazzon was the recipient of a Kinsman Summer Research Studentship. The views expressed are those of the authors, and do not necessarily represent those of the Government of Victoria.