Inequality over the business cycle: evidence from an emerging economy

Jaimes Bonilla Richard and Francy Vallejo
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Jaimes Bonilla Richard: Pontificia Universidad Javeriana
Francy Vallejo: Pontificia Universidad Javeriana

Vniversitas Económica, 2024, vol. 24, issue 4, No 2024-08-21, 24 pages

Abstract: This paper studies the effects of aggregate shocks on income inequality in Colombia using structural vector autoregressions (SVARs), identified with sign restrictions. We employ household survey data to construct a set of monthly in-come inequality measures and we find that inequality varies substantially and ambiguously over the business cycle. Contractionary aggregate supply and monetary policy shocks lead to an increase in inequality, while contractionary aggregate demand shocks tend to decrease it, at least in the short term. We discuss the role of labor income heterogeneity and income composition in the transmission mechanism of aggregate shocks.

Keywords: Macroeconomic shocks; Inequality; Structural Vector Autoregres- sions; Sign Restrictions (search for similar items in EconPapers)
JEL-codes: D63 E00 E32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:col:000416:021410

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