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Examining the Impact of Macro-Economic Conditions on Income Inequality

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Author Info
Jäntti, Markus (Department of Economics, University of Tampere, Finland)
Jenkins, Stephen P. () (Institute for Social and Economic Research, University of Essex and IZA, Bonn)

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Abstract

This paper proposes a new approach for analyzing the relationship between macroeconomic factors and the income distribution. The conventional method of analysis is regression of summary inequality indices on variables such as the unemployment and inflation rates. Building on the lessons from recent advances in time-series econometrics, we suggest instead that one should first fit a parametric functional form to the income distribution for each year, and then model the time series of model parameters in terms of the macroeconomic factors. Inferences about the relationship between the income distribution and macro-economic factors can be derived from the model estimates. We apply these methods to data from the United Kingdom for 1961-91, and contrast the results with those found using earlier methods.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 364.

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Length: 38 pages
Date of creation: Sep 2001
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Handle: RePEc:iza:izadps:dp364

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Related research
Keywords: Income inequality; macro-economic conditions; unemployment; inflation; Singh-Maddala distribution;

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Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1991-2), pages 1-74. [Downloadable!]
  2. Wilfling, Bernd & Kramer, Walter, 1993. "The Lorenz-ordering of Singh-Maddala income distributions," Economics Letters, Elsevier, vol. 43(1), pages 53-57. [Downloadable!] (restricted)
  3. Blinder, Alan S & Esaki, Howard Y, 1978. "Macroeconomic Activity and Income Distribution in the Postwar United States," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 604-09, November. [Downloadable!] (restricted)
  4. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
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  5. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September. [Downloadable!] (restricted)
  6. Jantti, Markus, 1994. "A More Efficient Estimate of the Effects of Macroeconomic Activity on the Distribution of Income," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 372-78, May. [Downloadable!] (restricted)
  7. Leslie, Derek & Pu, Yonghao, 1995. "Unions and the Rise in Wage Inequality in Britain," Applied Economics Letters, Taylor and Francis Journals, vol. 2(8), pages 266-70, August. [Downloadable!] (restricted)
  8. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May. [Downloadable!] (restricted)
  9. Bjorklund, Anders, 1991. " Unemployment and Income Distribution: Time-Series Evidence from Sweden," Scandinavian Journal of Economics, Blackwell Publishing, vol. 93(3), pages 457-65.
  10. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation, Yale University. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Atkinson T, 2002. "Evaluation Of National Action Plans On Social Inclusion: The Role Of EUROMOD," EUROMOD Working Papers EM1/02, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
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