Monetary Policy and the Distribution of Income: Evidence from U.S. Metropolitan Areas

Giovanni Favara, Francesca Loria and Zakrajšek, Egon

No 19995, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use zip code-level Statistics of Income data from the Internal Revenue Service to measure the distribution of income within U.S. metropolitan areas from 1998 through 2019. Exploiting geographic variation in income distribution over time, we study how unanticipated changes in the monetary policy stance shape the subsequent dynamics of income inequality. The results indicate that monetary policy persistently affects labor income inequality and that these distributional effects are amplified significantly in weak local labor markets.

Keywords: Income inequality; Local labor markets (search for similar items in EconPapers)
JEL-codes: E21 E52 E58 (search for similar items in EconPapers)
Date: 2025-03
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