Does a Growing Local Economy Mean More or Less Low Income Households?

The regressions below use IRS zip code level data. The first regression regresses future changes in the number of returns filed by the lowest income households (<$25k agi) on the current changes in returns for all categories of household incomes.

Imagine a local economy that is performing better than other local economies in a state (time fixed effects included). I would imagine seeing more higher income tax payers. The trend for low income tax payers is ambiguous. On the one hand, the number of low income tax payers will decline as the economy improves and wages increase. On the other hand, more unemployed people may enter the workforce, especially at lower salary levels. This ambiguous outcome of an improving local economy on the number of low income tax payers may explain the insignificant coefficient on the the change in low income tax payers (lnreturnslow).

lnreturns "log number of returns"

lnreturnslow "log number of returns for taxpayers earning less than $25k in a zip code"

State Time trends are controlled for in both regressions