On the link between U.S. national debt and income distribution: Asymmetric evidence from state level data

Abstract

The limited number of studies that have assessed the impact of debt on income inequality have used data at the aggregate country level. In this paper, when we use aggregate data from the U.S., we do not find much of a significant effect. However, when we use data from each of the states in the U.S., we find short-run (but not long-run) effects. By then assuming that the effects of debt on GINI (inequality measure) could be asymmetric, we employ a nonlinear ARDL modeling approach and find that in the long run, reducing national debt in the U.S. could reduce income inequality in most states.