Long-Run Growth and Income Distribution: Evidence for Italy and the US

Claudio Morana

Giornale degli Economisti, 2003, vol. 62, issue 2, 171-210

Abstract: In this paper we investigate the long-run growth process in Italy and the US over the period 1920-2001, using a common trends model. Coherent with the neoclassical growth model, we find that long-run economic growth can be explained by two permanent shocks, namely a technological shock and a labour supply shock. Interestingly, technological progress has an initial negative impact on the wage share, and a successive positive, but transitory impact on income equality for Italy, and a permanent and positive impact for the US, pointing to a cycle in income distribution. On the other hand, the labour supply shock has a transitory and positive impact on the wage share for Italy, and a permanent and negative impact on the wage share for the US, possibly reflecting different labour market institutional characteristics. Hence, fluctuations in the distribution of income should be expected as a consequence of economic growth.

Keywords: Markov switching; common trends; economic growth (search for similar items in EconPapers)
JEL-codes: C32 O11 (search for similar items in EconPapers)
Date: 2003
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