Relationship Between Income Distribution and Global Competitiveness Index

Abstract

This study argues income distribution can determine Global Competitiveness Index (GCI) for a country. Two results of equality in income distribution affects GCI. One is economies of scale; because income equality consumption and production become more same structure and similar products produces more. Two is bargaining power; because consumption and production become more same import and export become more same to. Therefore, country can be gain monopolistic and monopsonistic power in foreign trade. Panel data model established for substantiates this argument covers 42 countries and annual data between 2007-2018. Econometric analysis results support the study. Model shown a positive relationship between income equality and the GCI. According to these results, GCI value decreases as GINI value increases. In other words, as the income distribution becomes unequal, the global competitiveness power of the country decreases. In this context, the study is an important source in explaining the effect of income distribution on GNI and gross domestic products (GDP).