Earnings Inequality and the Business Cycle / Gadi Barlevy, Daniel Tsiddon.

Format:

Book

Author/Creator:

Barlevy, Gadi.

Contributor:

National Bureau of Economic Research.

Tsiddon, Daniel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10469.

NBER working paper series no. w10469

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

Economists have long viewed recessions as contributing to increasing inequality. However, this conclusion is largely based on data from a period in which inequality was increasing over time. This paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality more when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th Century when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.

Notes:

Print version record

May 2004.