Causality Between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis

Document Type

Article

Publication Date

11-12-2016

Publication Title

Social Indicators Research

Volume

135

Issue

1

First page number:

269

Last page number:

289

Abstract

This study applies wavelet coherency analysis to examine the relationship between the U.S. per capita real GDP and six income inequality measures over the period 1917 to 2012. Wavelet analysis allows the simultaneous examination of correlation and causality between the two series in both the time and frequency domains. Our findings provide robust evidence of positive correlation between the growth and inequality across frequencies. Yet, directions of causality vary across frequencies and evolve with time. Evidence that inequality leads per capita real GDP at both high- and low-frequencies exists for the Top 1 and 10% measures of inequality with little evidence that real GDP per capita leads inequality. 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. per capita real GDP and inequality measures over time and frequency, suggesting important implications for policy makers. © 2016 Springer Science+Business Media Dordrecht

Keywords

Income; Inequality; U.S.; Wavelet analysis

Disciplines

Economics

Language

English

Comments

Corrections have been made to tables 5 and 10 of this publication. Corrections can be found at: https://digitalscholarship.unlv.edu/nursing_fac_articles/240/

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