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Title: The Regional Transmission of Uncertainty Shocks on Income Inequality in the United States

Citation Type: Working Paper

Publication Year: 2019

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Abstract: This paper explores the relationship between household income inequality and macroeconomic uncertainty in the United States. Using a novel large-scale macroeconometric model, we shed light on regional disparities of inequality responses to a national uncertainty shock. The results suggest that income inequality decreases in most states, with a pronounced degree of heterogeneity in terms of the dynamic responses. By contrast, some few states, mostly located in the Midwest, display increasing levels of income inequality over time. Forecast error variance and historical decompositions highlight the importance of uncertainty shocks in explaining income inequality in most regions considered. Finally, we explain differences in the responses of income inequality by means of a simple regression analysis. These regressions reveal that the income composition as well as labor market fundamentals determine the directional pattern of the dynamic responses. JEL CODES: C11, C30, E3, D31

Url: http://epub.wu.ac.at/6774/

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Authors: Fischer, Manfred M; Huber, Florian; Pfarrhofer, Michael

Series Title: Working Papers in Regional Science

Publication Number: 2019/01

Institution: Vienna University

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Publisher Location: Vienna

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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