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Measuring inequality persistence in OECD 1963–2008 using fractional integration and cointegration

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  • Gil-Alana, Luis A.
  • Škare, Marinko
  • Pržiklas-Družeta, Romina

Abstract

This paper investigates persistence of income inequality and its major determinants in 26 OECD countries. We use fractional integration and select GDP per capita, inflation and employment as major macroeconomic determinants of income inequality. We find income inequality is highly persistent in all the countries examined. There is a significant long-run equilibrium relationship between GDP growth and income inequality. Our results challenge the standard ‘trickle-down’ theory finding evidence of a negative and robust relationship between GDP per capita growth and the Gini index. Thus, GDP per capita growth shows large redistributive effects while inflation and employment are statistically insignificant.

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  • Gil-Alana, Luis A. & Škare, Marinko & Pržiklas-Družeta, Romina, 2019. "Measuring inequality persistence in OECD 1963–2008 using fractional integration and cointegration," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 65-72.
    • Handle: RePEc:eee:quaeco:v:72:y:2019:i:c:p:65-72
    DOI: 10.1016/j.qref.2018.12.006
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    Cited by:

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    2. Tule, Moses K. & Salisu, Afees A. & Ebuh, Godday U., 2020. "A test for inflation persistence in Nigeria using fractional integration & fractional cointegration techniques," Economic Modelling, Elsevier, vol. 87(C), pages 225-237.
    3. Karen Tumanyants & Sergey Arzhenovskiy & Olga Arkova & Maksim Monastyryov & Irina Pichulina, 2023. "Inequality and Economic Growth in Russia: Econometric Analysis," Russian Journal of Money and Finance, Bank of Russia, vol. 82(2), pages 52-77, June.

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    More about this item

    Keywords

    Income inequality; Persistence; OECD; Fractional integration; Gini index;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D60 - Microeconomics - - Welfare Economics - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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