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Asymmetric Effects of Inequality on Per Capita Real GDP of the United States

Author

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  • Adnen Ben Nasr

    (Université de Tunis, ISGT, BESTMOD, Tunisia)

  • Mehmet Balcilar

    (Eastern Mediterranean University, Northern Cyprus, Turkey; Montpellier Business School, Montpellier, France and University of Pretoria, Pretoria, South Africa)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Seyi Saint Akadiri

    (Eastern Mediterranean University, Northern Cyprus, Turkey)

Abstract

Existing literature on the short-run and long-run impact of economic growth on income inequality have found that positive and negative output shock have worsened income distribution in the United States. In this paper, we attempt to empirically examine the opposite, that is, the impact of positive and negative income inequality shocks on the real output level. Using the same time-series data, over a period 1917-2012, in a more comprehensive manner by employing six measures of income distribution, we examine the impact of an increase or decrease income inequality on economic growth, using the nonlinear Autoregressive Distributed Lag (NARDL) approach. Our empirical results show that the positive and negative income inequality shocks have asymmetric effects in the long-run. We found through the significant long-run asymmetric behaviors of our models that, income inequality shock - whether positive or negative have a positive long-run effect on real output level in the US.

Suggested Citation

  • Adnen Ben Nasr & Mehmet Balcilar & Rangan Gupta & Seyi Saint Akadiri, 2018. "Asymmetric Effects of Inequality on Per Capita Real GDP of the United States," Working Papers 201820, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201820
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    More about this item

    Keywords

    Income distribution; economic growth; asymmetry; time-series data; United States;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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