Inequality in Good and Bad Times: A Cross-Country Approach

Burcu Hacibedel, Pierre Mandon, Priscilla Muthoora and Nathalie Pouokam

No 2019/020, IMF Working Papers from International Monetary Fund

Abstract: This paper provides evidence of a strong relationship between the short-term dynamics of growth and inequality in developing economies. We find that reductions in inequality during growth upswings are largely reversed during growth slowdowns. Using a new methodology (mediation analysis), we identify unemployment, and youth unemployment especially, as the main channel through which fluctuations in growth affect future dynamics in inequality. These findings suggest that both the quality of jobs created and labor market policies are important to ensure that growth outcomes are conducive to inequality reduction.

Keywords: WP; youth unemployment; unemployment channel; dependent variable; mediation analysis; Inequality; Growth; Developing countries; Growth conditions; growth rate; confidence interval; explanatory variable; structural equation; Income inequality; Income distribution; Unemployment; Personal income; Consumption; East Asia; Europe; Caribbean; Global; Middle East (search for similar items in EconPapers)
Pages: 41
Date: 2019-01-22
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Citations: View citations in EconPapers (8)

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