As economies grow, industrial and geographical shifts in income lead to increasing regional disparities. Recent research delves into how these disparities are not just driven by factors like transportation costs or global trade but are intrinsically linked to structural transformations within economies. This innovative approach challenges the idea that falling transportation costs are the main cause of regional inequality. Instead, it highlights how rising incomes and changing consumption patterns naturally create industrial clusters, fueling urban growth and reinforcing regional disparities.

When incomes rise, demand shifts from basic subsistence goods like agriculture to more income-elastic industries, such as manufacturing and services. These industries, which benefit from economies of scale, tend to concentrate in specific regions, further driving the spatial concentration of economic activity. This concentration of industries leads to higher productivity, which in turn raises incomes and perpetuates the cycle of growth in certain areas, creating a feedback loop that makes regional inequality an inevitable feature of economic development.

The research challenges traditional models by showing that even without falling transportation costs, industrial concentration and urbanization occur naturally as economies evolve. This process, once it gains momentum, becomes self-reinforcing, making regional disparities an unavoidable aspect of advanced development. The findings provide a fresh perspective on policies aimed at addressing geographic inequality, suggesting that simply reducing trade costs or improving infrastructure may not suffice to overcome the inherent disparities shaped by structural economic changes.

By exploring the interaction between industrial transformation and regional inequality, this research provides crucial insights into how economic growth reshapes both sectoral output and geographical distribution, ultimately altering regional development paths.