Document Type : ORIGINAL ARTICLE
Abstract
This study analyzes the impact of business cycles in the production sector on wealth inequality in 7 middle east oil countries over the period 2005–2023, using the PMG-ARDL model. To extract business cycle fluctuations, the asymmetric time-varying Christiano–Fitzgerald (CF) filter is employed, which allows for precise separation of short-term cyclical components from long-term economic trends. The PMG-ARDL model enables the investigation of the short and long-run effects of business cycles on wealth inequality. The findings reveal that, for the wealthiest groups (top 1% and top 10%), the business cycles have positive and significant effect on wealth share. In contrast, the middle and lower-income groups (middle 40% and bottom 50% wealth shares) the impact of business cycles is negative. Moreover, inflation exhibits heterogeneous effect across different social strata: this variable has positive effect on inequality among the upper classes, but exert significantly negative impacts on the lower classes, reflecting structural disparities and varied economic resilience. These results align with Piketty’s theory regarding the dominance of capital returns over economic growth, implying that growth without adequate redistributive policies may aggravate inequality. Based on these findings, policymakers are advised to prioritize smart taxation, strengthened social safety nets, and sustainable job creation for vulnerable groups to reduce inequality and enhance social welfare.
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