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Asymmetric effects of inequality on real output levels of the United States

Author

Listed:
  • Adnen Ben Nasr

    (BESTMOD, Institut Supérieur de Gestion de Tunis)

  • Mehmet Balcilar

    (Eastern Mediterranean University, Northern Cyprus)

  • Rangan Gupta

    (University of Pretoria)

  • Seyi Saint Akadiri

    (Eastern Mediterranean University, Northern Cyprus)

Abstract

The existing literature on the short- and long-run impacts of economic growth on income inequality indicates that positive and negative output shocks have worsened the income distribution in the United States. In this paper, we report our empirical examination of the opposite; that is, the impact of positive and negative income inequality shocks on the real output levels. Using the same time-series data, over the period 1917–2012, in a more comprehensive manner, by employing six measures of income distribution, we examined the impact of an increase/decrease in income inequality on economic growth, using the NARDL approach. The results provide evidence in support of a long-run asymmetric impact between income inequality and the real output levels, since the long-run coefficients of positive changes have positive signs, while the signs of those of negative changes are negative, indicating that a decrease or an increase in income inequality improves the real output level in the US.

Suggested Citation

  • Adnen Ben Nasr & Mehmet Balcilar & Rangan Gupta & Seyi Saint Akadiri, 2020. "Asymmetric effects of inequality on real output levels of the United States," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(1), pages 47-69, March.
    • Handle: RePEc:spr:eurase:v:10:y:2020:i:1:d:10.1007_s40822-019-00129-x
    DOI: 10.1007/s40822-019-00129-x
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    More about this item

    Keywords

    Income distribution; Economic growth; Asymmetry; Nonlinear ARDL model; 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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