Title: Income inequality, unemployment, and government transfer: what does their dynamics tell us

Abstract

In this research, we explore the dynamics among measures of income inequality in the United States, male and female unemployment rates, and growth in government transfer using time series data. This research adopts a macro-econometric approach using a structural VAR model. Our structural impulse responses find growth in government transfer increases unemployment rates for both males and females. Female income inequality declines with increased government transfer. When the female income ratio rises, we observe the government transfer outlays fall over the forecast horizon. Variance decomposition finds that growth in government transfers is impacted by the male unemployment rate relatively more than the female unemployment rate. This research, therefore, suggests gender-specific government transfers to reduce income inequality. This, in effect, may reduce government transfer outlays over time. JEL code: C32, D63, E24, I38, J16