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On the Positive Correlation between Income Inequality and Unemployment

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  • Rubens Penha Cysne

    (Professor at the Graduate School of Economics of the Getulio Vargas Foundation)

Abstract

Two papers published in this journal (Jantti, 1994, and Mocan, 1999), among others, find empirical evidence that "increases in structural unemployment have a substantial aggravating impact on income inequality." The main point of this work is to show that standard job-search models can help us understand this empirical regularity. As a byproduct of the analysis, the paper also provides a closed-form general expression that enables direct calculation of the Gini coefficient of wage-income inequality as a function of any arbitrary initial distribution of wage offers. Three numerical examples illustrate the results. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Rubens Penha Cysne, 2009. "On the Positive Correlation between Income Inequality and Unemployment," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 218-226, February.
    • Handle: RePEc:tpr:restat:v:91:y:2009:i:1:p:218-226
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    References listed on IDEAS

    as
    1. Levine, Daniel B & Singer, Neil M, 1970. "The Mathematical Relation Between the Income Density Function and the Measurement of Income Inequality," Econometrica, Econometric Society, vol. 38(2), pages 324-330, March.
    2. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 113-126.
    3. Beach, Charles M, 1977. "Cyclical Sensitivity of Aggregate Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 56-66, February.
    4. Blinder, Alan S & Esaki, Howard Y, 1978. "Macroeconomic Activity and Income Distribution in the Postwar United States," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 604-609, November.
    5. repec:bla:econom:v:53:y:1986:i:212:p:421-45 is not listed on IDEAS
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