Some Recent Explanations of Income Inequality: An Evaluation and Critique

Abstract

This article attempts to evaluate five alternative explanations of the size distribution of income. It is based on a regression analysis of inequality data from 71 countries and different explanatory variables taken from various theoretical approaches. Also, the proper specification of the relationship between economic development and income inequality is used. The following tentative conclusions are reached: First, the most important correlate or determinant of inequality is the level of economic development; divergent conclusions in other studies are the result of improper specification. Second, communist countries have a more equal distribution of income than other societies. Third, high military participation ratios contribute to income equalization. Fourth, judgment about democratic performance has to be postponed because democracy seems to contribute to a more egalitarian distribution of income in one data set, but not in the others. Fifth, the three versions of dependency theory under consideration—Galtung's (1971), Rubinson's (1976), and Bornschier and Ballmer-Cao's (1979) have failed to contribute significantly to the explanation of income inequality.