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Non‐Linearity and Cross‐Country Dependence of Income Inequality
Author(s) -
Kalliovirta Leena,
Malinen Tuomas
Publication year - 2020
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12377
Subject(s) - economics , economic inequality , income inequality metrics , inequality , income distribution , autoregressive model , econometrics , labour economics , demographic economics , mathematics , mathematical analysis
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.