Examining the Impact of Macro-Economic Conditions on Income Inequality

Markus Jantti and Stephen Jenkins

No 364, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper proposes a new approach for analyzing the relationship between macroeconomic factors and the income distribution. The conventional method of analysis is regression of summary inequality indices on variables such as the unemployment and inflation rates. Building on the lessons from recent advances in time-series econometrics, we suggest instead that one should first fit a parametric functional form to the income distribution for each year, and then model the time series of model parameters in terms of the macroeconomic factors. Inferences about the relationship between the income distribution and macro-economic factors can be derived from the model estimates. We apply these methods to data from the United Kingdom for 1961-91, and contrast the results with those found using earlier methods.

Keywords: unemployment; macro-economic conditions; Income inequality; Singh-Maddala distribution; inflation (search for similar items in EconPapers)
JEL-codes: C51 D31 E6 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2001-09
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (3)

Published - published in: Journal of Economic Inequality, 2010, 8(2), 221–240

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Related works:
Working Paper: Examining the impact of macro-economic conditions on income inequality (2001)
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