Income Inequality and Macroeconomic Volatility: An Empirical Investigation

19 Pages Posted: 25 Jul 2005

See all articles by Richard J. Breen

Richard J. Breen

University of Oxford - Nuffield College

C. Garcia-Peñalosa

National Center for Scientific Research (CNRS) - GREQAM; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

We explore the impact of macroeconomic volatility on the distribution of income. Using a cross-section of developed and developing countries, we find that greater output volatility, defined as the standard deviation of the rate of output growth, is associated with a higher Gini coefficient and income share of the top quintile. The coefficients suggest that a strong effect on inequality resulting from a reduction in volatility: the Gini coefficient of a country like Chile would fall by 6 points if it were to reduce its volatility to the same level as Sweden or Norway. Our results seem not to be driven by the high-inequality/high-volatility Latin American countries.

Suggested Citation

Breen, Richard J. and Garcia-Penalosa, Cecilia, Income Inequality and Macroeconomic Volatility: An Empirical Investigation. Review of Development Economics, Vol. 9, No. 3, pp. 380-398, August 2005, Available at SSRN: https://ssrn.com/abstract=762591

Richard J. Breen

University of Oxford - Nuffield College ( email )

Manor Road
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Cecilia Garcia-Penalosa (Contact Author)

National Center for Scientific Research (CNRS) - GREQAM ( email )

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France
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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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