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On the positive correlation between income inequality and unemployment

  • Cysne, Rubens Penha

Two papers published in this journal (Jantti, 1994, and Mocan, 1999), among others, find empirical evidence that "increases in structural unemployment have a substantial aggravating impact on income inequality." The main point of this work is to show that standard job-search models can help us understand this empirical regularity. As a byproduct of the analysis, the paper also provides a closed-form general expression that enables direct calculation of the Gini coefficient of wage-income inequality as a function of any arbitrary initial distribution of wage offers. Three numerical examples illustrate the results. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 561.

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Date of creation: 01 Aug 2004
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Handle: RePEc:fgv:epgewp:561
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  1. Charles M. Beach, 1974. "Cyclical Sensitivity of Aggregate Income Inequality," Working Papers 162, Queen's University, Department of Economics.
  2. Nolan, Brian, 1986. "Unemployment and the Size Distribution of Income," Economica, London School of Economics and Political Science, vol. 53(212), pages 421-45, November.
  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.
  4. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
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