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Causality between Output and Income Inequality across U.S. States: Evidence from a Heterogeneous Mixed Panel Approach

Shinhye Chang, Hsiao-Ping Chu, Rangan Gupta () and Stephen Miller ()
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Shinhye Chang: University of Pretoria
Hsiao-Ping Chu: Ling-Tung University

No 2018-07, Working papers from University of Connecticut, Department of Economics

Abstract: 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)
Date: 2018-06
Note: Stephen Miller is the corresponding author
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Working Paper: Causality between Output and Income Inequality across US States: Evidence from a Heterogeneous Mixed Panel Approach (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2018-07

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