Examining the role of structural change in income inequality: insights from quantile ARDL modeling in the United States

Abstract This study attempts to examine the dynamics of the U.S. manufacturing sector and income inequality using a Quantile Autoregressive Distributed Lag (QARDL) model from 1965q1 to 2019q4. We analyze the impact of urbanization, economic growth, human capital, manufacturing, and human capital on income distribution. An inverted U-shaped Kuznets curve indicates that as the manufacturing sector progresses the income disparity diminishes. Limiting our analysis to the industrial value contributed to GDP might cause a harder discern the overall effect on income inequality. A higher rate of GDP might not guarantee equal incomes, which may show an increase in certain sectors. Looking at the manufacturing sector's share of total employment, which reflects both employment opportunities and revenue sources, allows more direct reflection of income disparity. This study contributes to the literature by enhancing our comprehension of the intricate processes of income distribution, offering valuable insights for policymakers and researchers to better tackle income inequality.