Large-sample evidence of income inequality in resource-rich nations

Abstract

It is commonly presumed that economies specializing in mining and oil production have high national income inequality. The research testing this proposition is equivocal, no doubt because of small sample sizes and missing inequality data for the majority of mining and oil economies. This paper makes use of a large sample of income inequality data that is comprehensive in its coverage of mining and oil economies. Mine production is found to cause higher national income inequality on a gross, pre-tax basis and a net, post-tax and post-redistribution basis. Botswana is prime example of a mining economy having both high gross and net income inequality. Oil production, on the other hand, does not cause higher gross or net income inequality. If anything, oil is associated with reduced gross and net income inequality. The mechanism for this difference from mining is not clear.