Income Inequality and Macroeconomic Volatility: An Empirical Investigation
We explore the impact of macroeconomic volatility on the distribution of income. Using a cross-section of developed and developing countries, we find that greater output volatility, defined as the standard deviation of the rate of output growth, is associated with a higher Gini coefficient and income share of the top quintile. The coefficients suggest that a strong effect on inequality resulting from a reduction in volatility: the Gini coefficient of a country like Chile would fall by 6 points if it were to reduce its volatility to the same level as Sweden or Norway. Our results seem not to be driven by the high-inequality/high-volatility Latin American countries. Copyright Blackwell Publishing Ltd 2005.
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Volume (Year): 9 (2005)
Issue (Month): 3 (08)
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