Impact of the Great Recession and financial crises on family income shares and income inequality.

This paper analyses the impact of the Great Recession and financial crisis on income distribution controlling for three types of inflation measures, gross domestic product (GDP) deflator, Personal Consumption Expenditure deflator (PCE) and the Consumer Price Index (CPI). The study examines family income shares quintile data from the United States Census Bureau by race for the years 1972 to 2016. The civilian unemployment rate is decomposed as defined in Mocan (1999) into the structural unemployment (trend) a more permanent measure and the short-run impact of cyclical unemployment (business cycle) while incorporating the Hodrick–Prescott filter (HP) and the Kalman filter for robustness to compare regression results for accuracy. Out of sample post Great Recession dynamic forecasts of socioeconomic groups are conducted by applying the auto regressive moving average (ARIMA) model. The focus on income inequality has gained more interest and traction due to the financial crisis, especially, from a socioeconomic perspective focusing on the differential impact by race. The focus of the paper specifies the need to examine income distributions from the perspective of family income share differentials to better understand the disparities among socioeconomic groups and the adverse affects as a result of business cycles. This paper differs from Mocan (1999) in several ways: the time period spans from 1972 to 2016, the distribution of income and income inequality and the impact of the Great Recession are analyzed from a socioeconomic perspective (race) and the macroeconomic impact of inflation is measured with a GDP deflator, PCE deflator, and the CPI. The findings confirm an increase in income inequality due to the Great Recession and the financial crisis of 2008-2009.