Causality between Output and Income Inequality across US States: Evidence from a Heterogeneous Mixed Panel Approach
Shinhye Chang (),
Hsiao-Ping Chu (),
Rangan Gupta () and
Stephen Miller ()
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Shinhye Chang: Department of Economics, University of Pretoria, Pretoria, South Africa
Hsiao-Ping Chu: Department of Business Administration, Ling-Tung University, Taichung, Taiwan
No 201706, Working Papers from University of Pretoria, Department of Economics
In this paper, we investigate the causal relationship between output, proxied by personal income, and income inequality in a panel data of 48 states from 1929 to 2012. We employ the causality methodology proposed by Emirmahmutoglu and Kose (2011), as it incorporates possible slope heterogeneity and cross-sectional dependence in a multivariate panel. Evidence of bi-directional causal relationship exists for several inequality measures -- the Atkinson Index, Gini Coefficient, the Relative Mean Deviation, Theil’s entropy Index and Top 10% -- but no evidence of the causal relationship for the Top 1% measure. Also, this paper finds state-specific causal relationships between personal income and inequality.
Keywords: Income inequality; Panel data; Personal Income; Granger causality (search for similar items in EconPapers)
JEL-codes: C33 D31 D63 (search for similar items in EconPapers)
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Working Paper: Causality between Output and Income Inequality across U.S. States: Evidence from a Heterogeneous Mixed Panel Approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201706
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