We use top income data and the newly developed regime switching Gaussian mixture vector autoregressive model to explain the dynamics of income inequality in developed economies during the last 100 years. Our results indicate that the process of income inequality consists of two equilibriums...

This paper proposes a new approach for analyzing the relationship between macroeconomic factors and the income distribution. The conventional method of analysis is regression of summary inequality indices on variables such as the unemployment and inflation rates. Building on the lessons from...