EconPapers    
Economics at your fingertips  
 

Sources of Inequality and Business Cycles: Evidence from the US and Japan

Masaru Inaba, Kengo Nutahara and Daichi Shirai

No 23-006E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: Weinvestigate (i) sources of inequality and business cycle fluctuations in the US and Japan and (ii) the effects of reducing inequality on business cycles. Developing a heterogeneous-agent business cycle model with unconstrained and hand-to-mouth households and various wedges to represent economic distortions, we estimate the model by the Bayesian methods. We find that, in the US, the labor market distortion specific to unconstrained households is the common factor that significantly impacts business cycles and consumption inequality, whereas there are no common factors in Japan. In both countries, the primary source of business cycles is distortions in aggregate productivity, and that of consumption inequality is household-specific labor market distortions. We assess labor market reforms and redistribution policy as means to reduce consumption inequality. Our findings imply that the effects of lowering inequality on business cycle volatility depend on the country and how it is done. We also find that labor market reform is welfare-improving in both countries while redistribution policy is not.

Pages: 53
Date: 2024-12
New Economics Papers: this item is included in nep-dge and nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cigs.canon/en/uploads/2025/01/WP23-006E_in ... a_shirai_revised.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cnn:wpaper:23-006e

Access Statistics for this paper

More papers in CIGS Working Paper Series from The Canon Institute for Global Studies Contact information at EDIRC.
Bibliographic data for series maintained by The Canon Institute for Global Studies ().

 
Page updated 2025-01-09
Handle: RePEc:cnn:wpaper:23-006e