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GINI DP 30: Stylized Facts on Business Cycles and Inequality

Author

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  • Virginia Maestri

    ()

  • Roventini, A. (Andrea)

Abstract

Business cycles are expected to contribute to drive the dynamics of inequality of countries. This paper provides new stylized facts about the relationship between business cycles and inequality. We study the cross-correlations of filtered series of inequality, on the one side, and macro-economic variables (e.g. GDP, unemployment, inflation, etc), on the other. In addition, the analysis explores the Granger causality of such relationships. We use the RED database that allows to study the dynamics of different sources and measures of inequality in a subset of OECD countries. We find that inequality series are non stationary. At the business cycle frequencies, income inequality is counter-cyclical, while consumption inequality is pro-cyclical. We find a stronger correlation of the business cycle with inequality in the hours of work than with inequality in hourly wages. We find a considerable evidence of a two-way causality macroeconomic variables, on one side, and inequality at the business cycle frequencies.

Suggested Citation

  • Virginia Maestri & Roventini, A. (Andrea), 2012. "GINI DP 30: Stylized Facts on Business Cycles and Inequality," GINI Discussion Papers 30, AIAS, Amsterdam Institute for Advanced Labour Studies.
  • Handle: RePEc:aia:ginidp:30
    as

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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Strange facts about inequality over the business cycle
      by Economic Logician in Economic Logic on 2013-01-02 21:27:00

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    Cited by:

    1. Ferrara, Maria & Tirelli, Patrizio, 2017. "Equitable fiscal consolidations," Economic Modelling, Elsevier, vol. 61(C), pages 207-223.
    2. David Pothier & Damien Puy, 2014. "Demand Composition and Income Distribution," IMF Working Papers 14/224, International Monetary Fund.
    3. García, Gustavo A. & Raymond, Josep Lluis & Roig, José Luis, 2014. "Distribución de la renta y ciclo económico: España 2003-2011," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 30, pages 53-77.
    4. Maria Ferrara & Patrizio Tirelli, 2014. "Fiscal Consolidations: Can We Reap the Gain and Escape the Pain?," Working Papers 283, University of Milano-Bicocca, Department of Economics, revised Oct 2014.
    5. Diana Alessandrini & Stephen Kosempel & Alessandra Pelloni & Thanasis Stengos, 2016. "Earnings inequality, the business cycle, and the life cycle," Working Papers 1602, University of Guelph, Department of Economics and Finance.

    More about this item

    Keywords

    Inequality; business cycles; detrending; cross-correlations; non-stationarity; Granger causality tests. JEL Classification: C10; D3; E32.;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D3 - Microeconomics - - Distribution

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