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Long-Run Growth and Income Distribution: Evidence for Italy and the US

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  • Claudio Morana

    ()
    (Università del Piemonte orientale)

Abstract

In this paper we investigate the long-run growth process in Italy and the US over the period 1920-2001, using a common trends model. Coherent with the neoclassical growth model, we find that long-run economic growth can be explained by two permanent shocks, namely a technological shock and a labour supply shock. Interestingly, technological progress has an initial negative impact on the wage share, and a successive positive, but transitory impact on income equality for Italy, and a permanent and positive impact for the US, pointing to a cycle in income distribution. On the other hand, the labour supply shock has a transitory and positive impact on the wage share for Italy, and a permanent and negative impact on the wage share for the US, possibly reflecting different labour market institutional characteristics. Hence, fluctuations in the distribution of income should be expected as a consequence of economic growth.

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Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 62 (2003)
Issue (Month): 2 (October)
Pages: 171-210

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Handle: RePEc:gde:journl:gde_v62_n2_p171-210

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Related research

Keywords: Markov switching; common trends; economic growth;

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