The Relationship between the Inflation Rate and Inequality Across U.S. States: A Semiparametric Approach

Quantity and Quality, Forthcoming

18 Pages Posted: 3 Mar 2017 Last revised: 26 May 2018

See all articles by Mehmet Balcilar

Mehmet Balcilar

Eastern Mediterranean University

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: March 2, 2017

Abstract

This paper uses a cross-state panel for the United States over the 1976 to 2007 period to assess the relationship between income inequality and the inflation rate. Employing a semiparametric instrument variable (IV) estimator, we find that the relationship depends on the level of the inflation rate. A positive relationship occurs only if the states exceed a threshold level of inflation rate. Below this value, inflation rate lowers income inequality. The results suggest that a nonlinear relationship exists between income inequality and the inflation rate.

Keywords: Income inequality, Inflation rate, Semiparametric instrumental variable estimator

JEL Classification: E31, D31, C14

Suggested Citation

Balcilar, Mehmet and Chang, Shinhye and Gupta, Rangan and Miller, Stephen M., The Relationship between the Inflation Rate and Inequality Across U.S. States: A Semiparametric Approach (March 2, 2017). Quantity and Quality, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2926546 or http://dx.doi.org/10.2139/ssrn.2926546

Mehmet Balcilar

Eastern Mediterranean University ( email )

Gazimagusa
Turkey

HOME PAGE: http://www.mbalcilar.net

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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