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Revisiting macroeconomic activity and income distribution in the USA

Author

Listed:
  • John A. Bishop

    (East Carolina University)

  • Haiyong Liu

    (East Carolina University)

  • Lester A. Zeager

    (East Carolina University)

  • Yizhen Zhao

    (Northeastern University)

Abstract

We revisit the distributional implications of macroeconomic activity in the USA by estimating the effects of the unemployment and inflation rates on the quintile Lorenz ordinates. We have access to 16 years of additional data (1995–2010) that were not available for the earlier studies, covering the deepest recession since the Great Depression. These additional data do not substantively change the results regarding the effects of unemployment and inflation on income inequality (both increase it). Adding controls for other important macroeconomic variables that have increased substantially in recent decades (public transfers, government budget deficits, and openness to trade) also has little effect on the findings regarding unemployment and inflation. Changes in budget deficits are uniformly equalizing, and public transfers increase the share of the bottom 20% across different specifications. Greater openness to international trade increases inequality in some specifications but has little effect when we also include controls for public transfers and budget deficits.

Suggested Citation

  • John A. Bishop & Haiyong Liu & Lester A. Zeager & Yizhen Zhao, 2020. "Revisiting macroeconomic activity and income distribution in the USA," Empirical Economics, Springer, vol. 59(3), pages 1107-1125, September.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:3:d:10.1007_s00181-019-01729-x
    DOI: 10.1007/s00181-019-01729-x
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    Cited by:

    1. Süssmuth, Bernd & Wieschemeyer, Matthias, 2022. "Taxation and the distributional impact of inflation: The U.S. post-war experience," Economic Modelling, Elsevier, vol. 111(C).

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    More about this item

    Keywords

    Unemployment; Inflation; Income distribution; Lorenz curve; United States;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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    1. Revisiting macroeconomic activity and income distribution in the USA (Emp Econ 2020) in ReplicationWiki

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