Earnings Inequality and the Business Cycle

Daniel Tsiddon and Gadi Barlevy

No 4451, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Economists have long viewed recessions as contributing to increasing inequality. This conclusion is largely based on data from a period in which inequality was increasing over time, however. This Paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th century when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.

Keywords: Business cycles; Great depression; Wage inequality; Income inequality; Human capital; Stochastic ben porath model (search for similar items in EconPapers)
JEL-codes: E32 J24 J31 N10 N30 O15 (search for similar items in EconPapers)
Date: 2004-06
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP4451 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Earnings inequality and the business cycle (2006)
Working Paper: Earnings inequality and the business cycle (2004)
Working Paper: Earnings Inequality and the Business Cycle (2004)
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:cpr:ceprdp:4451

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4451

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().