2018/01/01 by Manfréd M. Fischer, Florian Huber, Fischer, Manfred M. +3
Economics, Econometrics and Finance · #Econometrics (econ.EM) #Energy, Environment, Economic Growth #FOS: Economics and business #Fiscal Policy and Economic Growth #Market Dynamics and Volatility #Monetary Policy and Economic Impact
paper · pdf · doi:10.48550/arxiv.1806.08278
openalex publication_date 2018/06/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this paper, we explore the relationship between state-level household\nincome inequality and macroeconomic uncertainty in the United States. Using a\nnovel large-scale macroeconometric model, we shed light on regional disparities\nof inequality responses to a national uncertainty shock. The results suggest\nthat income inequality decreases in most states, with a pronounced degree of\nheterogeneity in terms of shapes and magnitudes of the dynamic responses. By\ncontrast, some few states, mostly located in the West and South census region,\ndisplay increasing levels of income inequality over time. We find that this\ndirectional pattern in responses is mainly driven by the income composition and\nlabor market fundamentals. In addition, forecast error variance decompositions\nallow for a quantitative assessment of the importance of uncertainty shocks in\nexplaining income inequality. The findings highlight that volatility shocks\naccount for a considerable fraction of forecast error variance for most states\nconsidered. Finally, a regression-based analysis sheds light on the driving\nforces behind differences in state-specific inequality responses.\n