Opening a can of worms: the pitfalls of explaining income inequality using time series data

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Abstract

This paper argues that time-series regression analysis is of only very limited use for understanding the determinants of income inequality. The argument is based on a combination of results from the time series econometrics literature and several characteristics of inequality itself, principally nonstationarity of the data in most inequality regression models, and the weak theoretical foundations underlying the models. A sample of postwar US data is used to illustrate the problems involved.

Original languageEnglish
Pages (from-to)221-230
Number of pages10
JournalApplied Economics
Volume32
Issue number2
DOIs
Publication statusPublished - 2000

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