Income inequality and the cost of recessions

2021 ◽  
Vol 71 (1) ◽  
pp. 85-97
Author(s):  
Mostafa Shahee ◽  
Glenn P. Jenkins
Keyword(s):  
Income Inequality ◽  
Business Cycle ◽  
Empirical Evidence ◽  
Gini Index ◽  
High Income ◽  
Income Distributions ◽  
The Business Cycle ◽  
The Cost ◽  
The Relationship

AbstractThis study empirically examines the relationship between the severity of recessions experienced by countries and their income distributions. The analysis is carried out for 28 higher middle- and high-income countries between 1970 and 2013. The empirical evidence derived from the changes in the Gini-index suggests that a greater degree of income inequality increases the cumulative loss of GDP inflicted by recessions. The increased cost emerges from both a longer duration and a deeper amplitude for the contractionary phase of the business cycle.

scholarly journals Income inequality and the business cycle

2015 ◽  
Vol 62 (1) ◽  
pp. 93-104
Author(s):  
Mostafa Shahee
Keyword(s):  
Income Inequality ◽  
Business Cycle ◽  
Least Squares ◽  
Ordinary Least Squares ◽  
Lower Number ◽  
Income Loss ◽  
Least Squares Estimators ◽  
The Business Cycle ◽  
Number Of Cycles ◽  
The Relationship

This paper first examines the relationship between ordinary least squares estimators of consumption and investment for 36 selected countries with their respective Gini indices. The analysis shows that income inequality is consistent with a smaller estimator of consumption and a greater estimator of investment. Second, the cycles of GDP, consumption and investment are dated separately to determine how the deepness and duration of cycles of those variables are correlated with the Gini indices of countries. The results show that income inequality leads to a deeper and longer decline of GDP, which causes a greater cumulative income loss of GDP during recession, and a somewhat faster speed of recovery during expansion. Likewise, the result of a correlation between Gini indices and the number of cycles in consumption, investment and GDP indicate that income inequality is associated with a greater number of cycles in consumption and GDP and a lower number of cycles in investment.

The Relationship Between Gender and Promotion Over the Business Cycle: Does Firm Size Matter?

2021 ◽  
Author(s):  
George Saridakis ◽  
Priscila Ferreira ◽  
Anne‐Marie Mohammed ◽  
Susan Marlow
Keyword(s):  
Business Cycle ◽  
Firm Size ◽  
The Business Cycle ◽  
Size Matter ◽  
The Relationship

scholarly journals Credit procyclicality and financial regulation in South Africa

2016 ◽  
Vol 19 (4) ◽  
pp. 467-478
Author(s):  
James Bernstein ◽  
Leroi Raputsoana ◽  
Eric Schaling
Keyword(s):  
South Africa ◽  
Business Cycle ◽  
Financial Institutions ◽  
Financial Regulation ◽  
Banking Supervision ◽  
Expansion Phase ◽  
Reference Guide ◽  
Common Reference ◽  
The Business Cycle ◽  
The Relationship

This study assesses the behaviour of credit extension over the business cycle in South Africa for the period 2000 to 2012. This is motivated by the proposal of the Basel Committee on Banking Supervision to look at credit extension over the business cycle as a reference guide for implementing countercyclical capital buffers for financial institutions. The study finds that credit extension in South increases during the trough phase, while the relationship between credit extension and the business cycle becomes insignificant during the peak phase. The study also finds that credit extension decreases during the expansion phase, while it increases during the contraction phase. Thus we do not find any evidence of procyclical behaviour of credit extension in South Africa, and the latter should therefore be used with caution and not as a mechanical rule based common reference guide for countercyclical capital buffers for financial institutions. 

scholarly journals Protection and the Business Cycle

2003 ◽  
Vol 3 (1) ◽  
Author(s):  
Kyle Bagwell ◽  
Robert W. Staiger
Keyword(s):  
Business Cycle ◽  
Empirical Studies ◽  
Trade Policies ◽  
Trade Volume ◽  
Upward Trend ◽  
Theoretical Support ◽  
Empirical Regularities ◽  
The Business Cycle ◽  
Liberal Trade ◽  
The Relationship

Abstract Empirical studies have repeatedly documented the countercyclical nature of trade barriers. In this paper, we propose a simple theoretical framework that is consistent with this and other empirical regularities in the relationship between protection and the business cycle. Focusing on self-enforcing trade agreements, we find theoretical support for countercyclical movements in protection levels. The fast growth in trade volume that is associated with a boom phase facilitates the maintenance of more liberal trade policies than can be sustained during a recession phase in which growth is slow. We also find that acyclic increases in the level of trade volume give rise to protection, implying that whether rising imports are met with greater liberalization or increased protection depends on whether they are part of a cyclic upward trend in trade volume or an acyclic increase in import levels.

scholarly journals Hiring, Churn, and the Business Cycle

2012 ◽  
Vol 102 (3) ◽  
pp. 575-579 ◽  
Author(s):  
Edward P Lazear ◽  
James R Spletzer
Keyword(s):  
Business Cycle ◽  
Job Creation ◽  
Labor Turnover ◽  
Present Evidence ◽  
Employment Dynamics ◽  
Job Openings ◽  
The Business Cycle ◽  
The Cost

Hires occur for two reasons - to grow a business and to replace those who have left (churn). Churn is an important part of employment dynamics, allowing workers to move to their most productive use. We present evidence on churn from the Job Openings and Labor Turnover Survey (JOLTS). Churn is procyclical. During the 2007-09 recession, four-fifths of hiring reductions are associated with reduced churn, not with reductions in job creation. We estimate that the cost of reduced churn is about two-fifths of a percentage point of GDP annually throughout the three-and-one-half year period since the beginning of the recession.

scholarly journals Bank wholesale funding and credit procyclicality: Evidence from Korea

2013 ◽  
Vol 60 (5) ◽  
pp. 615-631 ◽  
Author(s):  
Sangjun Jeong ◽  
Hueechae Jung
Keyword(s):  
Business Cycle ◽  
Emerging Economies ◽  
Commercial Banks ◽  
Marked Effect ◽  
The Other ◽  
Financial Fragility ◽  
Credit Growth ◽  
The Business Cycle ◽  
The Relationship ◽  
Higher Sensitivity

Credit procyclicality has recently been the focus of considerable attention, but what fuels the often excessive credit growth is rarely questioned. We investigate the relationship between the composition of banks? liabilities and their credit procyclicality. After examining the macroeconomic context where banks rely increasingly on wholesale funding (WSF), we estimate the effect of WSF on the banks? credit growth using quarterly panel data for the commercial banks of Korea from 2000 to 2011. We find that a higher sensitivity of banks? WSF to the business cycle leads to an excessive response of credit growth to the business cycle, even with a low share of WSF on bank liabilities. On the other hand, we find that overseas WSF has a more marked effect on credit procyclicality, which may additionally exacerbate the financial fragility of export-led emerging economies.

scholarly journals Inequality over the business cycle: the role of distributive shocks

2021 ◽  
pp. 1-30
Author(s):  
Marius Clemens ◽  
Ulrich Eydam ◽  
Maik Heinemann
Keyword(s):  
Income Inequality ◽  
Income Distribution ◽  
Business Cycle ◽  
Parameter Estimates ◽  
Panel Estimation ◽  
Bayesian Techniques ◽  
Elasticity Of Intertemporal Substitution ◽  
Ex Ante ◽  
The Business Cycle

Abstract This paper examines how wealth and income inequality dynamics are related to fluctuations in the functional income distribution over the business cycle. In a panel estimation for OECD countries between 1970 and 2016, although inequality is, on average countercyclical and significantly associated with the capital share, one-third of the countries display a pro- or noncyclical relationship. To analyze the observed pattern, we incorporate distributive shocks into an RBC model, where agents are ex ante heterogeneous with respect to wealth and ability. We find that whether wealth and income inequality behave countercyclically or not depends on the elasticity of intertemporal substitution and the persistence of shocks. We match the model to quarterly US data using Bayesian techniques. The parameter estimates point toward a non-monotonic relationship between productivity and inequality fluctuations. On impact, inequality increases in response to TFP shocks but subsequently declines. Furthermore, TFP shocks explain 17% of inequality fluctuations.

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