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The Effect of Growth Volatility on Income Inequality

Author

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  • Ho-Chuan Huang

    (Tamkang University)

  • WenShwo Fang

    (Feng Chia University)

  • Stephen M. Miller

    (University of Nevada, Las Vegas and University of Connecticut)

Abstract

This paper assesses the long-run effect of growth volatility on income inequality using a comprehensive panel of annual U.S. state-level data during the 1945 to 2004 period. Using the pooled mean group (PMG) estimator, we find overwhelming evidence supporting the hypothesis that larger growth volatility positively and significantly associates with higher income inequality. In addition, our key finding is robust to alternative lag structures, conditioning variables, inequality measures, volatility indicators, and time periods.

Suggested Citation

  • Ho-Chuan Huang & WenShwo Fang & Stephen M. Miller, 2012. "The Effect of Growth Volatility on Income Inequality," Working papers 2012-09, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2012-09
    Note: Stephen M. Miller is corresponding author
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    1. Koehler-Geib,Fritzi & Hnatkovska,Viktoria, 2015. "Business cycles accounting for Paraguay," Policy Research Working Paper Series 7284, The World Bank.
    2. Yang, Yiwen & Greaney, Theresa M., 2017. "Economic growth and income inequality in the Asia-Pacific region: A comparative study of China, Japan, South Korea, and the United States," Journal of Asian Economics, Elsevier, vol. 48(C), pages 6-22.
    3. Mani Motameni, 2015. "Private Insurance and Income Inequality in Iran," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(3), pages 418-425, March.
    4. Ibrahim, Mansor H., 2016. "Business cycle and bank lending procyclicality in a dual banking system," Economic Modelling, Elsevier, vol. 55(C), pages 127-134.
    5. Adnen Ben Nasr & Mehmet Balcilar & Rangan Gupta & Seyi Saint Akadiri, 2018. "Asymmetric Effects of Inequality on Per Capita Real GDP of the United States," Working Papers 201820, University of Pretoria, Department of Economics.
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    7. Cole, Ismail M., 2014. "Short- and long-term growth effects of special interest groups in the U.S. states: A dynamic panel error-correction approach," MPRA Paper 54455, University Library of Munich, Germany, revised 02 Mar 2014.
    8. repec:eee:quaeco:v:66:y:2017:i:c:p:192-201 is not listed on IDEAS

    More about this item

    Keywords

    Income inequality; growth volatility; mean group estimator; pooled mean group estimator;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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