U.S. Uncertainty and Income Inequality in Gulf Cooperation Council Countries

Abstract

Economic and institutional determinants of income inequality had been robustly examined. However, the impact of uncertainty, which is more volatile than other economic indicators, on income distribution, has been largely understudied within the literature. Using new data on economic policy (EPU) uncertainty constructed by Baker et al. (2013), and the World Inequality Database (WID), this article examines the impact of U.S. EPU on income inequality in Gulf Cooperation Council (GCC) countries since 1980, using an error correction model (ECM). It is found that U.S. EPU dynamics can widen the income inequality gap in GCC. JEL Codes D31, D63, D80