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Measuring inequality persistence in OECD 1963–2008 using fractional integration and cointegration

Luis Gil-Alana (), Marinko Skare () and Pržiklas-Družeta, Romina

The Quarterly Review of Economics and Finance, 2019, vol. 72, issue C, 65-72

Abstract: This paper investigates persistence of income inequality and its major determinants in 26 OECD countries. We use fractional integration and select GDP per capita, inflation and employment as major macroeconomic determinants of income inequality. We find income inequality is highly persistent in all the countries examined. There is a significant long-run equilibrium relationship between GDP growth and income inequality. Our results challenge the standard ‘trickle-down’ theory finding evidence of a negative and robust relationship between GDP per capita growth and the Gini index. Thus, GDP per capita growth shows large redistributive effects while inflation and employment are statistically insignificant.

Keywords: Income inequality; Persistence; OECD; Fractional integration; Gini index (search for similar items in EconPapers)
JEL-codes: C22 C32 D60 E24 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:quaeco:v:72:y:2019:i:c:p:65-72