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The impact of macroeconomic conditions on income inequality

Jäntti, Markus and Jenkins, Stephen P. (2010) The impact of macroeconomic conditions on income inequality. The Journal of Economic Inequality, 8 (2). pp. 221-240. ISSN 1569-1721

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Abstract

This paper analyzes the relationship between macroeconomic factors and the income distribution using data on equivalized disposable household income from the United Kingdom for 1961–99. We argue in favour of fitting a parametric functional form to the income distribution for each year, and then modeling the time series of model parameters in terms of the macroeconomic factors, as this better allows us to take into account non-stationarity in the time series. Estimates from models that relate income distribution parameters to cyclical variables in first differences (to account for non-stationarity) suggest that neither inflation nor unemployment have significant effects on income inequality. Compared to the commonly-used method of modelling the income shares directly, our approach indicates that there was no clear cut relationship between macroeconomic factors and the UK income distribution during the last third of the twentieth century.

Item Type: Article
Official URL: http://www.springer.com/economics/growth/journal/1...
Additional Information: © 2009 Springer Science + Business Media, LLC.
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
Sets: Departments > Social Policy
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 02 Feb 2011 16:07
URL: http://eprints.lse.ac.uk/32035/

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