Growth Volatility and Inequality in the U.S.: A Wavelet Analysis

43 Pages Posted: 2 Jun 2018

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

Mark E. Wohar

University of Nebraska at Omaha

Date Written: May 21, 2018

Abstract

This study applies wavelet coherency analysis to explore the relationship between the U.S. economic growth volatility, and income and wealth inequality measures over the period 1917 to 2015 and 1962 to 2014. We consider the relationship between output volatility during positive and negative growth scenarios. Wavelet analysis simultaneously examines the correlation and causality between two series in both the time and frequency domains. Our findings provide evidence of positive correlation between the volatility and inequality across high (short-run)- and low-frequencies (long-run). The direction of causality varies across frequencies and time. Strong evidence exists that volatilities lead inequality at low-frequencies across income inequality measures from 1917 to 1997. After 1997, however, the direction of causality changes. 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. growth volatility and inequality measures over time and frequency domains, suggesting important implications for policy makers.

Keywords: Growth Volatility, Income and Wealth Inequalities, Wavelet Analysis

JEL Classification: C49, O15

Suggested Citation

Chang, Shinhye and Gupta, Rangan and Miller, Stephen M. and Wohar, Mark E., Growth Volatility and Inequality in the U.S.: A Wavelet Analysis (May 21, 2018). Available at SSRN: https://ssrn.com/abstract=3182856 or http://dx.doi.org/10.2139/ssrn.3182856

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

Mark E. Wohar

University of Nebraska at Omaha ( email )

Department of Economics
6708 Pine Street MH 332S
Omaha, NE 68182
United States
402-554-3712 (Phone)
402-554-2853 (Fax)

HOME PAGE: http://cba.unomaha.edu/faculty/mwohar/WEB/homepage.html

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