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In 1990 central-city residents had a median income equivalent to about 74 percent of that earned by suburban residents. The central cities have become home to a disproportionate share of social problems: Their infrastructure is arguably in poorer condition, their unemployment rates higher, and their governments more impoverished than those of the suburbs. The evidence suggests that these conditions have remained the same or worsened over the past 20 years. Urban areas are not all the same, and suburbs are not all wealthy, but it would not be at all misleading to say that America’s poor places have become poorer over the past two decades.

This article reviews the evidence on the chronic problem of fiscal disparities among city and suburban governments in metropolitan areas. There is a nexus between the fiscal disparities problem and the spatial mismatch problem—the suburbanization of jobs and housing discrimination have led to a surplus of workers relative to jobs in inner-city neighborhoods. One of these problems argues that there are market and discrimination constraints on the ability of the central-city population to realize its full potential in the job market, and that these constraints exacerbate the social problems that plague the city. The other argues that there are market and government policy constraints that limit the ability of urban governments to deliver adequate services at reasonable, competitive tax rates. There are no equilibrating forces in place that would reverse either disparity, and the policy options open to redress the imbalances are very limited.

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