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  • 1 Department of Policy Studies, Queen's University, Robert Sutherland Hall, Kingston, Ontario, K7L 3N6, Canada
  • | 2 Department of Economics, Queen's University, Kingston, Ontario, Canada and Eastern Mediterranean University, Famagusta, North Cyprus
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Abstract

This study empirically examines the relationship between the severity of recessions experienced by countries and their income distributions. The analysis is carried out for 28 higher middle- and high-income countries between 1970 and 2013. The empirical evidence derived from the changes in the Gini-index suggests that a greater degree of income inequality increases the cumulative loss of GDP inflicted by recessions. The increased cost emerges from both a longer duration and a deeper amplitude for the contractionary phase of the business cycle.

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