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Macroeconomic Determinants of Inequality of Opportunity in the United States: 1970–2009

In: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting

Author

Listed:
  • Gustavo A. Marrero
  • Juan Gabriel Rodríguez

Abstract

Conventional wisdom predicts that changes in macroeconomic conditions significantly affect income inequality. In this paper, we hypothesize that the way in which macroeconomic conditions affect inequality depends on how these conditions influence the constituents of total inequality: inequality of opportunity (IO) and inequality of effort (IE). Using the PSID database for the United States (1970–2009), we first decompose total inequality into these components. Then, we specify a dynamic model that relates each inequality component to a set of macroeconomic factors. Apart from real GDP and inflation rates, the most widely used factors in the literature, we also consider outstanding consumer credits and public welfare and health care expenditures. We find that real GDP and outstanding credits have a negative and significant effect upon IO and IE, while inflation has a positive and significant effect only on IE, and welfare expenditures have a negative and significant effect only on IO.

Suggested Citation

  • Gustavo A. Marrero & Juan Gabriel Rodríguez, 2016. "Macroeconomic Determinants of Inequality of Opportunity in the United States: 1970–2009," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 307-330, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:reinzz:s1049-258520160000024013
    DOI: 10.1108/S1049-258520160000024013
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    More about this item

    Keywords

    Income inequality; inequality of opportunity; inequality of effort; growth cycle; outstanding consumer credit; D63; E32; O16; O51;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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