Does vulnerable employment narrow income inequality? Evidence from developing countries

Abstract

Most people at the lower end of the income spectrum in developing countries rely on vulnerable employment for their survival. In the absence of alternative sources of income, vulnerable employment narrows income inequality (inequality) by providing income to these workers. This study examines this assertion by using data from a panel of 65 developing countries covering 1995-2019. The empirical analysis is based on dynamic panel data models. Two critical findings emerge from this study. First, in developing countries, vulnerable employment reduces inequality, although the reduction is quite marginal. Second, vulnerable employment has a gender-specific effect on narrowing inequality. Specifically, male vulnerable employment has a greater impact on reducing inequality than its female counterpart. In light of the efforts of developing countries to reduce inequality (SDG 10) and to provide decent work for all (SDG 8), this study is of particular importance.