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Title: The Transmission of Uncertainty Shocks on Income Inequality: State-Level Evidence From the United States
Citation Type: Working Paper
Publication Year: 2018
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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.
Url: https://www.uni-salzburg.at/fileadmin/multimedia/SOWI/documents/VWL/Working_Papers/WP_04_18_2.0.pdf
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Authors: Fischer, Manfred M; Huber, Florian; Pfarrhofer, Michael
Series Title: Working Papers in Economics
Publication Number: 2018-04
Institution: University of Salzburg
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Publisher Location: Salzburg, Austria
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure
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