TY  - JOUR
AU  - Barlevy,Gadi
AU  - Tsiddon,Daniel
TI  - Earnings Inequality and the Business Cycle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10469
PY  - 2004
Y2  - May 2004
UR  - http://www.nber.org/papers/w10469
L1  - http://www.nber.org/papers/w10469.pdf
N1  - Author contact info:
Gadi Barlevy
Economic Research Department
Federal Reserve Bank of Chicago
230 South LaSalle
Chicago, IL  60604
Tel: 312/322-6379
Fax: 312/322-2357
E-Mail: gbarlevy@frbchi.org

Daniel Tsiddon
Department of Economics
Tel-Aviv University
Ramat-Aviv
Tel-Aviv  69978  ISRAEL
Tel: NA
E-Mail: tsiddon@post.tau.ac.il
AB  - Economists have long viewed recessions as contributing to increasing inequality. However, this conclusion is largely based on data from a period in which inequality was increasing over time. This paper examines the connection between long-run trends and cyclical variation in earnings inequality. We develop a model in which cyclical and trend inequality are related, and find that in our model, recessions tend to amplify long-run trends, i.e. they involve more rapidly increasing inequality more when long-run inequality is increasing, and more rapidly decreasing inequality when long-run inequality is decreasing. In support of this prediction, we present evidence that during the first half of the 20th Century when earnings inequality was generally declining, earnings disparities indeed appeared to fall more rapidly in downturns, at least among workers at the top of the earnings distribution.
ER  -