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Time-Varying Predictability of Labor Productivity on Inequality in United Kingdom

Author

Listed:
  • David Gabauer

    (Institute of Applied Statistics, Johannes Kepler University, Altenbergerstraße 69, 4040 Linz, Austria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Jacobus Nel

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Woraphon Yamaka

    (Center of Excellence in Econometrics, Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand)

Abstract

In this paper, we analyze time-varying predictability of labor productivity for growth in income (and consumption) inequality of the United Kingdom (UK) based on a high-frequency (quarterly) data set over 1975:Q1 to 2016:Q1. Results indicate that the growth rate of an index of labor productivity has a strong predictive power on growth rate of income (and consumption) inequality in the UK. Interestingly, the strength of the predictive power is found to be higher towards the end of the sample period in the wake of the global financial crisis. In addition, based on time-varying impulse response function analysis, we find that inequality and labor productivity growth rates are in general negatively associated over our sample period, barring a short-lived positive impact initially.

Suggested Citation

  • David Gabauer & Rangan Gupta & Jacobus Nel & Woraphon Yamaka, 2020. "Time-Varying Predictability of Labor Productivity on Inequality in United Kingdom," Working Papers 202084, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202084
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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