A note on the cyclical behaviour of the income distribution

Abstract

Empirically, the income share is procyclical for the low-income groups and acyclical for the top 5%. To generate this kind of behaviour in a DGE business cycle model, we consider overlapping generations and elastic labour supply in addition to those elements considered by Castaneda et al. (1998). We also analyse a model with rigid wages. However, these features do not help to constitute a major improvement vis-a-vis their model. JEL classification: C68, D31, E32 Keywords: Income distribution, business cycle, overlapping generations, unemployment, pensions