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Asymmetric Effects of Inequality on Per Capita Real GDP of the United States

Adnen Ben Nasr (), Mehmet Balcilar (), Rangan Gupta () and Seyi Akadiri ()

No 201820, Working Papers from University of Pretoria, Department of Economics

Abstract: Existing literature on the short-run and long-run impact of economic growth on income inequality have found that positive and negative output shock have worsened income distribution in the United States. In this paper, we attempt to empirically examine the opposite, that is, the impact of positive and negative income inequality shocks on the real output level. Using the same time-series data, over a period 1917-2012, in a more comprehensive manner by employing six measures of income distribution, we examine the impact of an increase or decrease income inequality on economic growth, using the nonlinear Autoregressive Distributed Lag (NARDL) approach. Our empirical results show that the positive and negative income inequality shocks have asymmetric effects in the long-run. We found through the significant long-run asymmetric behaviors of our models that, income inequality shock - whether positive or negative have a positive long-run effect on real output level in the US.

Keywords: Income distribution; economic growth; asymmetry; time-series data; United States (search for similar items in EconPapers)
JEL-codes: O16 C22 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2018-03
New Economics Papers: this item is included in nep-gro
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