Income inequality and the local banking system: A case study based on Italian data

The trend of the last decade is the closures of lending institutions and their branches by way of withdrawal of bank licenses in case of failure to meet the requirements for the adequacy and structure of equity and reserves, as well as the consolidation of bank assets in the form of mergers. The main object of this paper is to answer the following question: does the closure of banks and bank branches affects lending to small and medium-sized enterprises? To answer this question we used panel data on the loans granted to small and medium-sized enterprises and the closure of banks and bank branches in the Russian regions in 2010–2016. This research shows that the effect of bank closures on lending to SMEs in the Russian regions is ambiguous. On the one hand, the estimates show the negative effect of bank closures on the loans. On the other, there is no evidence of a statistically significant link between the closure of bank branches and lending to small and medium-sized enterprises in the Russian regions in the year following the closure. The findings also reveal that the closure of banks does not lead to the concentration of lending to small and medium-sized enterprises in the largest banks but is associated with shrinking of there loans to SMEs

In this study, the influence of economic growth on income disparities in 29 sub-Saharan African (SSA) countries is investigated for the period 2005-2015. The primary objective of the study is to empirically test Kuznets? hypothesis, which holds that there is an inverted U-shaped relationship between economic growth and income inequality. The study examined this relationship using four proxies for income inequality: the composite inequality index, the Atkinson index, the Gini coefficient, and the Palma ratio. Using a modified version of a difference generalised method of moments (GMM) estimation technique, it was found that regardless of the proxy used to measure income inequality, there is a consistently significant negative relationship between income per capita (y) and income inequality in the countries under study. A consistent positive relationship was also found between the square of income per capita (y2) and income inequality across all the proxies used in the study. The study found that the relationship between economic growth and income inequality follows a U-curve. The result suggests that while economic growth initially lowers income inequality, inequality eventually rises in tandem with growth. This suggests that the bulk of the studied economies in the SSA region are situated on the downward portion of the U-curve. The policy implications are discussed.

Quantitative Aspects of the Economic Growth of Nations: VIII. Distribution of Income by Size

This paper aims to analyze trends in income and consumption inequality for paid and self-employed households and examine to what extent changes in aggregate consumption and income inequality can be explained by changes in their permanent and transitory components over time using data from the Italian Survey of Household Wealth (SHIW) covering the period 1989-2016. The results obtained from the Generalized Method of Moments (GMM) analysis reveal differences in consumption and income inequality, as well as their permanent and transitory components, between self-employed and payroll households. In particular, self-employed households experience higher levels of both income and consumption inequality, the increase in total income and consumption inequality is mainly driven by an increase in its transitory component. Furthermore, findings from other descriptive measures of inequality, such as the Gini coefficient, the variance of the log, 90th/10th, and 50th/10th percentile ratios, support the notion that income inequality is higher than consumption inequality across all groups, with self-employed households exhibiting a more pronounced difference.

This study investigates the effect of macroeconomic variables on income distribution in Africa using panel data from 2001 to 2016. This is motivated by the high degree of income inequality and poverty in the region. Twenty‐eight (28) African countries were selected to capture every region. The selection of countries and the choice of this period were informed by data availability. The variables of interest were income inequality obtained from the Standardized World Income Inequality Database (SWIID), while the Gross Domestic Product, Inflation, and Unemployment were obtained from the World Bank database. A dynamic panel model using the Generalized Method of Moment (GMM) estimator was used to control for both individual and time‐specific effects. The Heterogeneous aspect of the Augmented Dicky‐Fuller (ADF), the Levine‐Lin‐Chu test and, the Im‐Pesaran‐Shin (IPS) panel units root process were utilized to test for the stationarity of the panel data. The results of the General Method of Moment (GMM) indicate a significant negative relationship between income inequality and economic growth. The study rejected the existence of the Kuznets curve hypothesis, and concludes that Inflation rate, Wage rate and labour force impact negatively income inequality, while unemployment and education impact positively.

Income inequality is a pervasive problem in South Africa and particularly affects the Eastern Cape, where poverty levels remain high despite several efforts to address this societal issue. The datasets from 1499 households used for this study, were extracted from the 2021 South African General Household Survey. This study thus examined the distributional pattern of households’ income inequality in Eastern Cape, South Africa, through the use of exploratory data analysis and application of regression-based decomposition of inequality. The EDA results revealed that relatively older households are more concentrated than those young people, female-headed households were also predominant in the study area, while the majority of the households are Black South Africans. The magnitude of the monetary variables’ departure from the mean inferred clear evidence of a widened households’ income disparity or inequality in the study area. The decomposition analysis indicated the contributions of various socioeconomic factors to income inequality. The findings from the regression-based decomposition of inequality found household size, access to basic infrastructure services, possession of assets, internet communication facilities, and households’ population group, as the major drivers of the households’ income inequality in the province, while livelihood diversity has a relatively moderate proportionate contribution. On the other hand, factors such as age and gender of the household head, as well as households’ involvements in agriculture have a minor effect on the households’ income inequality. This paper finally concludes that the relative contributions of each factor contributing to inequality were deemed important for designing effective policy-relevant interventions which can be used to promote economic growth and to address this persistent challenge of income inequality in society.

Financial inclusion and income inequality in developing countries: The role of aging populations

Foreign aid is critical for developing economies to meet their developmental objectives. Income disparity is a major problem that can be addressed with foreign resources; however unscrupulous behaviors such as misappropriation of funds for personal gain might diminish the effectiveness of foreign aid. This paper analyses the influence of foreign aid (ODA) on income inequality for a panel of 62 developing nations, including regional and income categories by using the Generalized Method of Moments (GMM) on model, with two specifications. The results have shown a negative impact of foreign aid on income inequality in developing economies overall and in regional and income groups of economies except Sub-Saharan Africa (SSA) particularly in the first specification where corruption has not been included in the model. In the second specification where corruption has been included in the model, the corruption has shown boosting impact on income inequality in developing economies as well as in all the regional and income groups of the economies. However, the effect of ODA on income inequality has become insignificant in developing economies but positive in all groups except SSA. It explains that corruption leads to foreign aid ineffectiveness in developing economies. In the control variables, FDI has a diminishing effect on income inequality in the panel of developing economies as well regional and income groups of the economies. It is proposed that to reap the benefits of foreign aid in developing economies, corruption is necessary to be eliminated.

A GMM approach for estimation of volatility and regression models when daily prices are subject to price limits

Wealth disparity is a complex issue that has plagued the world for many years. China’s economic development has achieved world-renowned results during the last 40 years. Over that time, the country has risen from extreme poverty to the world’s second-largest economy. Nevertheless, the significant wealth inequality accompanying it has also caused great concern. At the start of China’s reform and opening-up period, government officials tacitly approved of this uneven development and made plans to “drive the rich first to the rich later” in pursuit of economic development. Economic development aims to achieve shared prosperity, not to deprive the relatively poor of wealth. As a result, wealth disparity in China must be addressed. Based on the Kuznets hypothesis, the theory of urban-rural dual structure, and the current situation in China, this paper has evaluated the current wealth gap in China. Since 1978, Chinese households’ wealth accumulation has come from the income gap. Private property was not allowed to exist during China’s planned economy period (1949-1977). After the reform and opening up period (After 1978), income disparities between various industrial sectors led to an initial round of wealth accumulation for many Chinese citizens. The industrialisation process and urbanisation rate significantly impacted China’s economic modernisation and growth. Therefore, this paper has analysed the effects of several factors on income disparity in China. The examined factors were; economic development, the urbanisation rate, and the industrialisation process. Based on the theoretical analysis, this paper selected time series data from 1978 to 2021, including; per capita GDP, the per capita disposable income of urban and rural residents, the urban population to total population ratio, and industry contribution to the GDP. First, an analysis of the impact of economic development on income inequality was conducted using a static model. Then, a VAR model was built through ADF and PP testing, and an impulse response and variance analysis were conducted to explain the impact of various factors on the change rate of income inequality. The study results indicated that (1) Economic development has resulted in a significant increase in the income of urban and rural residents. However, urban residents have benefited more. Simultaneously, the income gap between urban and rural areas has grown significantly alongside economic expansion. (2) Urbanisation showed little effect on the income gap in the short term; however, it increased it in the long term. (3) Industrialisation reduced the short- and long-term income gap while increasing urbanisation.

As there are limited attempts made by previous studies, this paper examines the impacts of financial access on income inequality using a panel data of 52 developed and developing countries ranging from 2005 to 2020. Initially, the Financial Access Survey (FAS), launched in 2009 suggested that demographic and geographical data of bank branches and automated teller machine (ATM) able to reflect the accessibility of financial service and UN SDG also adopted the demographic data of bank branches and automated teller machine in the SDG target goal as an alternative to expand financial access and strengthen the capacity of domestic financial institution. To measure financial access effectively, indicators such as the number of bank branches and automated teller machines per thousand square feet and hundred thousand adults are employed in this paper to proxy financial access and examine its impact on income inequality. In addition, since the empirical model is largely unexplored, this paper aims to examine the issue thoroughly with secondary data that cover a broader duration and capture changes within the same observation over time. Dynamic panel system generalized method of moments (GMM) estimators is used and the empirical result grounded in real-world data could adopt the outputs, which disclose the relative strength of the influence of financial access on income inequality and identify whether access to finance is useful to narrow down income inequality. The conclusions are also critical for policy design as well.

The objective of this research paper is to study the simultaneous relationship between fiscal decentralization, corruption, and income inequality among Vietnamese provinces. We use a balanced panel data set of 63 provinces/cities in Vietnam in the period from 2011 to 2018. The study used 3SLS-GMM (Three Stage Least Squares - Generalized Method of Moments estimator) and GMM-HAC (Generalized Method of Moments - Heteroskedastic and Autocorrelation Consistent estimator). Empirical evidence shows a strong simultaneous relationship: increased corruption will increase regional income disparities, income inequality, and increase fiscal decentralization. In addition, the results also suggest that an increase in per-capita income will reduce the level of corruption, or better control corruption of each province. The degree of increase in income inequality, which reduces fiscal decentralization, is the same for trade liberalization. All demonstrate that there is a simultaneous relationship between fiscal decentralization, corruption, and income inequality. In a region of high public governance quality, fiscal decentralization positively effects its economic growth. This issue will indirectly increase income inequality between provinces within a country. Our findings imply that a country’s fiscal decentralization strategy should be linked to improving corruption control and local governance effectiveness, indirectly improving income inequality between localities or regions.

Do Financial Crises increase Income Inequality?

Do financial crises increase income inequality?

Purpose The purpose of this study is to provide new empirical evidence on the impact of a variety of financial market forces on the ex post real cost of funds to corporations, namely, the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA. The study is couched within an open-economy loanable funds model, and it adopts annual data for the period 1973-2013, so that the results are current while being applicable only for the post-Bretton Woods era. The auto-regressive two-stage least squares (2SLS) and generalized method of moments (GMM) estimations reveal that the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA was an increasing function of the ex post real interest rate yields on six-month Treasury bills, seven-year Treasury notes, high-grade municipal bonds and the Moody’s BAA-rated corporate bonds, while being a decreasing function of the monetary base as a per cent of gross domestic product (GDP) and net financial capital inflows as a per cent of GDP. Finally, additional estimates reveal that the higher the budget deficit as a per cent of GDP, the higher the ex post real interest rate on AAA-rated long-term corporate bonds. Design/methodology/approach After developing an initial open-economy loanable funds model, the empirical dimension of the study involves auto-regressive, two-stage least squares and GMM estimates. The model is then expanded to include the federal budget deficit, and new AR/2SLS and GMM estimates are provided. Findings The AR/2SLS and GMM (generalized method of moments) estimations reveal that the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA was an increasing function of the ex post real interest rate yields on six-month Treasury bills, seven-year Treasury notes, high-grade municipal bonds and the Moody’s BAA-rated corporate bonds, while being a decreasing function of the monetary base as a per cent of GDP and net financial capital inflows as a per cent of GDP. Finally, additional estimates reveal that the higher the budget deficit as a per cent of GDP, the higher the ex post real interest rate on AAA-rated long -term corporate bonds. Originality/value The author is unaware of a study that adopts this particular set of real interest rates along with net capital inflows and the monetary base as a per cent of GDP and net capital inflows. Also, the data run through 2013. There have been only studies of deficits and real interest rates in the past few years.