Non‐Linearity and Cross‐Country Dependence of Income Inequality

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We use top income data and the newly developed regime‐switching Gaussian mixture vector autoregressive model to explain the dynamics of income inequality in developed economies within the past 100 years. Our results indicate that the process of income inequality consists of two equilibria identifiable by high inequality and high income fluctuations, and low inequality and low income fluctuations. Our results also imply that income inequality in the United States is the driver of income inequality in other developed economies. High wages and capital gains are found to be the likely channels for the U.S. influence.
Original languageEnglish
JournalReview of Income and Wealth
Issue number1
Pages (from-to)227-249
Number of pages23
Publication statusPublished - Mar 2020
MoE publication typeA1 Journal article-refereed

Fields of Science

  • 112 Statistics and probability

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