Great Recession and Income Inequality: a State-level Analysis

Abstract

This paper analyzes the impact of the Great Recession on the income inequalities of racial and ethnic groups, namely whites, blacks, Hispanics, and Asians, in the USA. As the US economy fell into a deep recession during the late 2000s, the unemployment rate skyrocketed, the stock markets crashed, and incomes significantly declined. Using the American Community Survey from 2005 to 2016, this paper presents novel results that suggest the Great Recession not only increased the overall income inequality in the USA but also within- and between-group income inequalities among racial and ethnic groups. Furthermore, the impact of the recession on inequality is not uniform across these racial and ethnic groups. More specifically, during the Great Recession, inequality among blacks, Hispanics, and Asians has significantly increased, while whites experienced only a moderate increase in income inequality. The findings of this work are both timely and relevant, especially in terms of public policy. Policymakers cognizant of problems associated with within- and between-group inequalities might concentrate on policies alleviating the impact of the recession, especially those geared toward racial and ethnic minorities.

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Notes

  1. 1.

    For a comprehensive analysis of racial and ethnic groups’ earnings, poverty, education, and health in the USA, see (Pew Research Center 2016) and specifically for Asians, see Segal et al. (2002).

  2. 2.

    For a general overview of income inequality in the USA, see Gottschalk and Danziger (2005).

  3. 3.

    In few instances, the respondents reported negative income due to possible losses in investment or self-employment. These negative values were converted to zero. The number of negative income responses is very limited. Furthermore, in the literature, the respondents with negative income values are either removed (see Zandvakili (1999)) or converted into zero (see Hoover and Yaya (2010, 2011). It should also be noted that the personal income variable in ACS is top coded to maintain the anonymity of the respondents.

  4. 4.

    https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-inequality.html.

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Correspondence to Mehmet E. Yaya.

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Yaya, M.E. Great Recession and Income Inequality: a State-level Analysis. J Econ Race Policy 1, 112–125 (2018). https://doi.org/10.1007/s41996-018-0016-6

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Keywords

  • Great Recession
  • Income inequality
  • Race
  • Ethnic minorities