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The Effect of Growth Volatility on Income Inequality

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  • Ho-Chuan (River) Huang

    (Department of Banking and Finance, Tamkang University)

  • WenShwo Fang

    (Department of Economics, Feng Chia University)

  • Stephen M. Miller

    (Department of Economics, University of Nevada, Las Vegas)

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 (River) Huang & WenShwo Fang & Stephen M. Miller, 2012. "The Effect of Growth Volatility on Income Inequality," Working Papers 1203, University of Nevada, Las Vegas , Department of Economics.
    • Handle: RePEc:nlv:wpaper:1203
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    More about this item

    Keywords

    Income Inequality; Growth Volatility; Mean Group Estimator; Pooled Mean Group Estimator;
    All these keywords.

    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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