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The Effect of Growth Volatility on Income Inequality

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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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    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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