Causality between Output and Income Inequality across U.S. States: Evidence from a Heterogeneous Mixed Panel Approach

Authors

  • Shinhye Chang University of Pretoria
  • Hsiao-Ping Chu Ling-Tung University
  • Rangan Gupta University of Pretoria
  • Stephen M. Miller University of Nevada, Las Vegas https://orcid.org/0000-0002-6754-0605

DOI:

https://doi.org/10.25071/1874-6322.40331

Abstract

In this paper, we investigate the causal relationship between output, proxied by personal income, and income inequality in a panel data of 48 states from 1929 to 2012. We employ the causality methodology proposed by Emirmahmutoglu and Kose (2011), as it incorporates possible slope heterogeneity and cross-sectional dependence in a multivariate panel. Evidence of bi-directional causal relationship exists for several inequality measures -- the Atkinson Index, Gini Coefficient, the Relative Mean Deviation, Theil’s entropy Index and Top 10% -- but no evidence of the causal relationship for the Top 1 % measure. Also, this paper finds state-specific causal relationships between personal income and inequality.

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Published

2020-06-26

How to Cite

Chang, S., Chu, H.-P., Gupta, R., & Miller, S. M. (2020). Causality between Output and Income Inequality across U.S. States: Evidence from a Heterogeneous Mixed Panel Approach. Journal of Income Distribution®, 28(1 (March), 20. https://doi.org/10.25071/1874-6322.40331

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Section

Articles