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Disaggregating the Effect of the Business Cycle on the Distribution of Income

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  • Rebecca M. Blank

Abstract

This paper disaggregates total household income into a complete set of components and studies the comparative cyclicality of these components to economic growth. Comparisons of the relative responsiveness to GNP growth of wages, hours of work, and total labor market income of heads and wives, and transfer income sources of households are made across income, race, sex and age groups. This provides a picture of the channels by which economic growth produces income change. Significant differences in elasticities are found to exist both between different income components and between different population groups for the same components. The narrowing income distribution in times of high growth occurs primarily because of large elasticities on head's labor market income among the poor. Both wages and hours show evidence of cyclicality. The labor market earnings of women -- both wives and household heads -- are far less responsive to growth. Cyclicality in transfer income varies enormously between population groups and by type of transfer.

Suggested Citation

  • Rebecca M. Blank, 1987. "Disaggregating the Effect of the Business Cycle on the Distribution of Income," NBER Working Papers 2397, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2397
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    References listed on IDEAS

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    1. Altonji, Joseph & Ashenfelter, Orley, 1980. "Wage Movements and the Labour Market Equilibrium Hypothesis," Economica, London School of Economics and Political Science, vol. 47(187), pages 217-245, August.
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    12. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
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    14. Blank, Rebecca M, 1989. "Disaggregating the Effect of the Business Cycle on the Distribution of Income," Economica, London School of Economics and Political Science, vol. 56(222), pages 141-163, May.
    15. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
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    Cited by:

    1. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 1-25.
    2. Lídia Farré & Francis Vella, 2008. "Macroeconomic Conditions and the Distribution of Income in Spain," LABOUR, CEIS, vol. 22(3), pages 383-410, September.

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    More about this item

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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