Causality between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis

Social Indicators Research, January 2018

26 Pages Posted: 20 Aug 2016 Last revised: 27 Jul 2020

See all articles by Shinhye Chang

Shinhye Chang

Univeristy of Pretoria

Rangan Gupta

University of Pretoria - Department of Economics

Stephen M. Miller

University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics

Date Written: August 19, 2016

Abstract

This study applies wavelet coherency analysis to examine the relationship between the U.S. per capita real GDP and six income inequality measures over the period 1917 to 2012. Wavelet analysis allows the simultaneous examination of correlation and causality between the two series in both the time and frequency domains. Our findings provide robust evidence of positive correlation between the growth and inequality across frequencies. Yet, directions of causality vary across frequencies and evolve with time. In the time-domain, the time-varying nature of long-run causalities implies structural changes in the two series. These findings provide a more thorough picture of the relationship between the U.S. per capita real GDP and inequality measures over time and frequency, suggesting important implications for policy makers.

Keywords: Income, Inequality, Wavelet analysis, U.S.

JEL Classification: C49, D31

Suggested Citation

Chang, Shinhye and Gupta, Rangan and Miller, Stephen M., Causality between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis (August 19, 2016). Social Indicators Research, January 2018, Available at SSRN: https://ssrn.com/abstract=2826771 or http://dx.doi.org/10.2139/ssrn.2826771

Shinhye Chang

Univeristy of Pretoria ( email )

Pretoria, Gauteng
South Africa

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154
United States
702-895-3776 (Phone)
702-895-1354 (Fax)

HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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