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Income Inequality and the Cost of Recessions

Author

Listed:
  • Mostafa Shahee

    (Department of Policy Studies, Queen’s University, Kingston, Ontario, Canada)

  • Glenn P. Jenkins

    (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)

Abstract

This article examines empirically the relationship between the severities of the recessions experienced by countries and their income distributions. The analysis is carried out for 36 countries over a period of 40 years. The empirical evidence from this paper suggests that a greater degree of income inequality increases the cumulative loss of GDP inflicted by recessions. The increase cost emerges from both a longer duration and a deeper amplitude for the contractionary phase of the business cycle.

Suggested Citation

  • Mostafa Shahee & Glenn P. Jenkins, 2016. "Income Inequality and the Cost of Recessions," Development Discussion Papers 2016-03, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:285
    as

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    References listed on IDEAS

    as
    1. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," American Economic Review, American Economic Association, vol. 105(3), pages 1217-1245, March.
    2. repec:ilo:ilowps:470934 is not listed on IDEAS
    3. Thomas Palley, 2010. "The Relative Permanent Income Theory of Consumption: A Synthetic Keynes-Duesenberry-Friedman Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(1), pages 41-56.
    4. Oecd, 2009. "Employment and Social Protection," OECD Journal on Development, OECD Publishing, vol. 9(4), pages 7-54.
    5. Joseph STIGLITZ, 2013. "The global crisis, social protection and jobs," International Labour Review, International Labour Organization, vol. 152, pages 93-106, January.
    6. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    7. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    8. Palley,Thomas I., 2013. "From Financial Crisis to Stagnation," Cambridge Books, Cambridge University Press, number 9781107612464, November.
    9. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Recession; income inequality; business cycle; income loss;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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