Examining the Impact of Macro-Economic Conditions on Income Inequality

38 Pages Posted: 27 Sep 2001

See all articles by Markus Jantti

Markus Jantti

Stockholm University

Stephen P. Jenkins

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration; Institute for the Study of Labor (IZA); University of Essex - Institute for Social and Economic Research (ISER)

Date Written: September 2001

Abstract

This paper proposes a new approach for analyzing the relationship between macroeconomic factors and the income distribution. The conventional method of analysis is regression of summary inequality indices on variables such as the unemployment and inflation rates. Building on the lessons from recent advances in time-series econometrics, we suggest instead that one should first fit a parametric functional form to the income distribution for each year, and then model the time series of model parameters in terms of the macroeconomic factors. Inferences about the relationship between the income distribution and macro-economic factors can be derived from the model estimates. We apply these methods to data from the United Kingdom for 1961-91, and contrast the results with those found using earlier methods.

Keywords: Income Inequality, Macro-Economic Conditions, Unemployment, Inflation, Singh-Maddala Distribution

JEL Classification: C51, D31, E6

Suggested Citation

Jantti, Markus and Jenkins, Stephen P., Examining the Impact of Macro-Economic Conditions on Income Inequality (September 2001). Available at SSRN: https://ssrn.com/abstract=285419

Markus Jantti

Stockholm University ( email )

Swedish Institute for Social Research
Stockholm, SE-10691
Sweden
+468162645 (Phone)

HOME PAGE: http://www.abo.fi/~mjantti/

Stephen P. Jenkins (Contact Author)

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration ( email )

Houghton Street
London, England WC2A 2AE
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 120 687 3374 (Phone)
+44 120 687 3151 (Fax)

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