Changes In Income Distribution Research Articles

Functional income distribution, effective demand and wealth in Denmark – insights from an empirical stock-flow consistent model

With the important contribution of Marglin and Bhaduri different demand and growth regimes were identified, which inspired a strand of empirical research aiming to uncover the type of growth regime. Most of these studies can be framed into two methodological approaches: (i) a structural, and (ii) an aggregative approach. In this paper, we use a third approach where we exploit the advantages of the stock-flow consistent framework. We argue that using an empirical SFC model retains the advantages of the two more widely used approaches, while adding some novel features: (i) the endogenization of income distribution, which allows for a two-way relationship between demand and income shares, (ii) the consistent incorporation of stock variables in the estimation of the equations of aggregate demand components, and (iii) the inclusion of endogenous labor market dynamics in the analysis. To introduce these features, we build an empirical stock-flow consistent model for Denmark for the period 2005q1–2020q1. Our analysis suggests that demand can neither be categorically defined as wage-led nor profit-led, as the effects of a change in income distribution on the aggregate demand components cancel each other out. Results are more conclusive for capital accumulation, which is found to be profit-led.

The Impact of Artificial Intelligence on Current Social Employment and Structure: Empirical Evidence from Provincial Industrial Robots

Artificial intelligence, as the core driving force of the new round of technological revolution and industrial change, has far-reaching impact on current social employment and structure. This study, based on the data of provincial industrial robots, explores the impact of artificial intelligence on employment. Through literature review, it is found that artificial intelligence has impact on the labor market, which may lead to changes in employment scale, employment structure, and income distribution. The study uses panel data model to analyze the impact of artificial intelligence development on employment scale and structure in 31 provinces (autonomous regions, municipalities directly under the Central Government) of China from 2010 to 2019. The results show that the development of artificial intelligence has a significant promoting effect on the employment scale in China, and also affects the employment structure towards “high-end” direction, but there is also a spillover effect towards “polarization”. In addition, the study finds that artificial intelligence has different effects on the employment of labor with different skills, promoting the employment of high-skilled labor in the manufacturing industry and inhibiting the employment of low-skilled labor, leading to a trend of high-end employment structure in the manufacturing industry. Therefore, the study proposes some prospects and suggestions for the impact of artificial intelligence on the social employment structure, in order to promote the transformation and upgrading of the industry, and achieve efficient intelligent production and optimal adjustment of employment structure. Through in-depth analysis of this study, important reference basis is provided for the current social issues facing the impact of artificial intelligence.

Contribution of the carbon tax, phase-out of thermoelectric power plants, and renewable energy subsidies for the decarbonization of Chile − A CGE model and microsimulations approach

There are various climate policies to decarbonize the energy matrix of a country. In the case of Chile, a carbon tax of 5 USD/tCO2 was initially implemented, and later, a schedule was established for the phase-out of coal-fired thermoelectric plants, all the above in the absence of subsidies for non-conventional renewable energy (NCRE). This study uses a computable general equilibrium (CGE) model and microsimulations to assess the contribution of current climate policies and other more demanding scenarios that accelerate the decarbonization of the Chilean energy matrix, considering economic, environmental, and distributional impacts. Specifically, carbon taxes are simulated with and without complementary climate policies (phase-out of coal-fired power plants and NCRE subsidies). The results show that the scenarios that combine the three climate policies generate a greater decrease in greenhouse gas emissions (40.4% ∼ 57.5%). Besides, the drop in GDP is more pronounced when coal-fired thermoelectric plants phase out (0.3% additional), and NCRE subsidies contribute to moderately reducing emissions. However, NCRE subsidies reduce the negative effect on households’ expenditure and income, especially in the poorest quintile. Finally, microsimulations show marginal changes in income distribution and an increase of up to 0.4 percentage points in the poverty rate.

Exploring near-linearities in price–rate of profit trajectories and the concept of effective rank in input–output matrices

In recent years, there has been a resurgence of interest in the controversies surrounding capital theory. At the heart of these debates are the empirically observed near-linearities in the price–rate of profit and wage rate of profit curves. This article posits that these near-linearities can be attributed to the low effective rank property inherent in the economy's system matrices of input–output coefficients. This suggests that a comprehensive representation of how prices evolve in response to changes in income distribution can be achieved with only a few eigenvalues and their respective eigenvectors. Furthermore, this low-dimensional system possesses the capability to capture the majority of distinctive features that characterize the input–output structure of the economy in relation to price movements.

Inequality, Consumption Emulation, and Growth

We develop a short-run neo-Kaleckian model to investigate the interplay of the functional and personal distribution of income and their impact on growth. Personal distribution becomes relevant in light of the institutionalist hypothesis of consumption emulation, which makes aggregate saving dependent on the concentration of wages and profits. A more equal distribution of wages and/or profits increases aggregate demand and the rate of capacity utilization. But the wage- or profit-led demand regime crucially depends on the difference between the propensity to save out of profits and that out of wages, as well as on the impact of changes in the profit and wage shares on the concentration of personal incomes. Preliminary evidence on Italy over the period 1980s–2010s highlights that demand regimes might be a relatively short-term and cyclical characteristic of that economy, with changes in the demand regime partly explained by changes in personal income distribution. JEL Classification: E11, D31, B52

Income distribution in Thailand is scale-invariant.

This study examines whether income distribution in Thailand has a property of scale invariance or self-similarity across years. By using the data on income shares by quintile and by decile of Thailand from 1988 to 2021, the results from 306-pairwise Kolmogorov-Smirnov tests indicate that income distribution in Thailand is statistically scale-invariant or self-similar across years with p-values ranging between 0.988 and 1.000. Based on these empirical findings, this study would like to propose that, in order to change income distribution in Thailand whose pattern had been persisted for over three decades, the change itself cannot be gradual but has to be like a phase transition of substance in physics.

Can economic policy be praised for its environmental policy in the field of transportation?

Car users in the European Union are facing concerning prospects regarding the costs and property value of their personal vehicles. According to EU documents, starting in 2035, the production of cars with internal combustion engines will cease. This has two main economic consequences for car users: firstly, they will be compelled to purchase electric vehicles, accepting higher entry costs for new vehicles with the same level of utility they have been accustomed to. Secondly, they will experience a significant loss in property value when parting with their personal vehicles, as their old cars will have to be sold at much reduced prices or even scrapped. From an emissions data standpoint, such a policy can be seen as an abrupt change in income distribution and a departure from the main principles of economic policy in a democratic society.

Higher inequality in Latin America: a collateral effect of the pandemic

ABSTRACT This study explores the evolution of inequality in Latin America during the COVID-19 pandemic by using primary data from household and employment surveys collected in 2020. First, we discuss the trends in inequality in the region from 1992 to 2020. Next, we estimate regression models to examine how the changes in demographics and education levels might be correlated with changes in income distribution. Finally, we use a panel regression model with fixed effects for 16 countries in the region to identify how the socioeconomic context might help explain the changes in income inequality. The empirical findings suggest that inequality increased by a statistically significant 2% between 2019 and 2020. We obtained significantly heterogeneous results when disaggregating by gender, urban/rural location, and sector of economic activity. Remittances had a modest effect, while government transfers helped to prevent more significant disparities in half the countries studied. Our estimations show that the decline in employment levels – due to the economic contraction caused by COVID-19— is associated with increases in income inequality that might gradually diminish with the recovery.

The relative income effect and labor supply

In the presence of relative income concerns, labor supply response is predicted to be smaller for individual wage change than for global wage change. This difference arises from the relative income effect, which in the case of global wage change is offset by changes in income distribution. We relate the predicted difference in labor supply response to the controversy about differences in micro and macro labor supply elasticities. The relative income effect can also account for a variety of empirical patterns of labor supply elasticity that could not be previously addressed within a single framework.

Framework of New Poverty Decomposition: An Application to the Evolution of Income Distribution

Ending poverty in all its forms is the first of the 17 sustainable development goals (SDGs) of the 2030 Agenda for Sustainable Development. Therefore, it is of great significance to study poverty in the context of sustainable development. At present, the effect of income growth on poverty reduction is becoming less evident, whereas the effect of inhabitant heterogeneity on poverty reduction is becoming increasingly significant in China. Based on the original two-dimensional poverty decomposition of income growth and redistribution, this study introduces the heterogeneity effect to decompose rural poverty in China from three dimensions. It first decomposes the change in income distribution into mean, variance, and residual effects using counterfactual analysis. Then, it introduces the Foster–Greer–Thorbecke index decomposition to decompose China’s rural poverty under the different poverty line. In addition, this paper employs mathematical statistics to analyze the effects of poverty’s growth, dispersion, and heterogeneity. This study finds that the three-dimensional poverty decomposition method can measure the trajectory and trend of poverty more precisely and comprehensively. Moreover, it found that the contradiction between economic growth and poverty regression is due to the fact that the poverty reduction effect of the growth effect and the poverty alleviation effect of the discrete effect have asymmetrical characteristics, whereas the discrete effect and the heterogeneous effect have symmetrical characteristics; that is, the poverty reduction effect of income growth is insufficient to compensate for the poverty deepening effect brought about by the widening income gap, and that the heterogeneous poverty reduction effect plays an increasingly important role. Therefore, to prevent residents from falling back into poverty after being lifted out of it, we must reduce the widening income gap. Moreover, residents’ ability to reduce poverty on their own must be strengthened.

A wage-led or profit-ledge demand regime: the case of Jordan (1990-20220)

Purpose- For too long, the performance of the Jordanian economy has been dissapointing. During the period 2010-2020, the mean annual growth rate in real Gross Domestic product (GDP) was equal to 2.0 percent. In addition, the overall unemployment rate increased from 12.5 percent in 2010 to 23.2 percent in 2020. To decrease the doublie-digit unemployment, any growth strategy requires a good understanding of the characteristics of the Jordanian economy. In other words, increasing the profit share in a wage-led economy, and increasing the wage share in a profit-led economy will both have negative consequences to economic growth. Therefore, it important to identify whether the Jordanian economic regime is wage-led or profit-led. Methodology- This paper investigates the effect of changes in the functional income distribution on economic growth in Jordan during the period 1990-2020. An autoregressive distributed lag (ARDL) approach is used to assess the presence of the long-run relationship between changes in income distribution and aggregate demand. Findings- Based on the estimated results, it is argued that the the demand regime in the Jordanian economy Jordan is wage-led. In other words, an increase in the wage-share leads to higher economic growth. Conclusion- Given the challenge of unemployment, the Jordanian government and the leaders of the private sector should not allow the supply and demand sides of the labor market determine wages. The economy needs pro-labor institutional reforms to realize strong and sustainable economic growth rates. Keywords: Jordan, growth, unemployment, wage-led, profit-led, net exports, ARDL, cointegration. JEL Codes: B50, E11, E12

Wage inequality and economic growth. A reassessment of the effects of Francoist developmentalism on income distribution in Spain

ABSTRACT The relationship between economic development and inequality has been closely examined by researchers. From the seminal work of Kuznets to the more recent work of Piketty, market forces in boom cycles, on the one hand, and institutional action, on the other, have been featured as the main drivers of change in income distribution towards more egalitarian societies. In the Spanish case, previous research has described varied processes with regard to the period of growth that followed the approval of the Stabilisation Plan during the Franco dictatorship (1959–1973). Thus, Alcaide reportedly detected a limited capacity of the developmentalist growth model to reduce inequality, which he attributed to institutional limitations. In contrast, later studies have highlighted the decline in inequality during the same period. This paper aims to investigate the effects of this growth cycle by examining the behaviour of wages in the most dynamic sector of the Spanish economy, industry. Specifically, by using the wage survey compiled by the Instituto Nacional de Estadística, the paper nuances previous research and shows how despite explosive growth, the developmentalist model and the peculiar institutional framework built within the Franco dictatorship contributed to increasing wage dispersion and income inequality in most industrial sectors.

Was Duesenberry Right? A Behavioral Analysis

Behavioral scientists agree on the role of context on decisions (evaluation). In contrast, traditional consumption models assume that the preferences and expenditures of different consumers are independent. This study develops a simplified version of the Expenditure cascade model, a variant of the Relative income hypothesis, to establish and test the claim that spending behavior is influenced by contextual factors like income distribution. This simple model implies that the average propensity to consume (APC) evolves with changes in income distribution. Empirical results show that over the period 1947-2021, the APC in the United States moves together (“jointly”) with changes in income distribution, consistent with theoretical expectations.

Economic Growth and Income Inequality Relationship: Role of Credit Market Imperfection

The 20th century has witnessed unequalled success in improving the living standard of people in most part of the world. According to World Bank annual Statistical reports, poverty has declined significantly in developing countries over the past twenty years but the progress has been uneven. The number of people living in poverty fell from 1.5 billion in 1981 to 1.1 billion in 2001. However, many low-income developing countries are still trapped in vicious circle of poverty. In Sub-Saharan Africa, the number of poor rose from 41 percent to 46 percent between 1981 to 2001.While in Eastern Europe and Central Asia, the numbers of poor people have risen to around 20 percent in 2001.1 Therefore; reduction of widely scattered poverty is the most challenging goal for low income developing countries. Economic growth is considered to be a powerful force for reducing poverty. High and sustained economic growth increases the labor demand and wages which in return will reduce poverty. Similarly, better earnings as a result of reduction in poverty lead to increase productivity and growth. But the extent of poverty reduction as a result of economic growth depends on how the distribution of income changes with economic growth and on initial Inequalities in income. If income inequality increases, then economic growth does not lead to a significant poverty reduction. Many developing countries achieved high growth rates in different periods but poverty does not reduce significantly in these periods due to increase in income inequalities. Most South and East Asian economies grew at higher per capita rates since early 1970 along with rise in income inequality over time. In contrast, Latin American countries grew by less than the half of average growth rates in South and East Asia while maintaining high income inequality.2 The differences in income inequality at a given rate of growth require that efforts to reduce poverty by stimulating growth are not sufficient and need to be complemented by efforts to reduce income inequalities.

Trends in Inequality in Pakistan between 1998-99 and 2001-02

Although there has been a much debate on poverty in Pakistan in recent time, the discussion on inequality remained limited. Poverty and inequality are closely linked—for a given mean income, the more unequal the income distribution, the larger the percentage of the population living in income poverty. Thus, incomes at the top and in the middle of the distribution may be just as important to us in perceiving and measuring poverty as those at the bottom. It is, thus, important to monitor the whole income distribution rather than merely the bottom of distribution. The issue of income inequality in Pakistan has been important in the policy discussions since the early 1960s. Since then, a number of attempts have been made to estimate the income or expenditure inequality using the Household Income and Expenditure Survey (HIES) data. However, a perception of increasing absolute poverty in Pakistan has shifted the focus of studies from inequality (or relative poverty) to absolute poverty. Consequently, a number of attempts have been made by various authors/institutions to estimate the poverty in Pakistan in the 1990s. The debate on trends in poverty during the 1990s—an era of stabilisation and structural adjustment has been wide-ranging in Pakistan. However, there is no discussion on the changes in income distribution from the policy and institutional reforms. World Bank (2003); FBS (2001) and Kemal (2003) are only three exceptions. While the former two studies report Gini Coefficients in their studies on absolute poverty in Pakistan without explaining its variations over time, the latter study is a comprehensive review on the income distribution in Pakistan.

Disaster Management, Development and Sustainability Nexus

Undeniably, disaster management certainly cuts across different aspects and sectors of sustainable development. Without implementation, policy frameworks for sustainable disaster management are a meaningless exercise that will impose float-up answers on top-down interpretations. Therefore, this effort will uncover the level of enforcement of legal obligations as well as the level of implementation of disaster management activities by the relevant disaster management institutions. National policy and strategies for integration of DRR in emergency preparedness, response and recovery programmes in the light of national level policies pertaining to the DRR for the reconstruction of affected communities are still remain challenge for the Government of Bangladesh to accelerate the paradigm shift from the relief culture to the DRR culture. Rural development has been identified as all efforts to improve the livelihoods of rural people such as change in rural productivity, employment opportunities, income and wealth distribution, social structure and social mobility, resource management, access to information, rural people's strength, health and education and so on. The success of rural development has been broadly measured by these changes and disaster management issues have been set aside.investment and sustainable development are under great threat due to frequent disasters. It is true that we need to work more diligently to reduce the risk of disasters. In line with the policy framework, this study also aims to assess the viewpoint on how political economy influence the government of Bangladesh on governance and institutional strengthening to help identify obstructions and opportunities for mainstreaming Disaster Management into development and how does governance work in the implementation of DM programmes in Bangladesh.

Afghan Refugees: A Threat to the Economic Security of Pakistan

Economic security is one of the most critical elements of human security. It refers to the economic capacity of an individual or community. The basic purpose of this paper is to analyze the impacts of Afghan refugees on the economic status of Pakistan. The findings of the research indicate that the presence of Afghan refugees contributes negatively to the economy of Pakistan. Major economic concerns include inflation, poverty, unemployment, weak social safety nets and change in income distribution. The paper ends with the suggestion that the issue of Afghan refugees must be resolved according to the National Action Plan in true letter and spirit. The policy of the state must be clear with national interest as the top priority.

PRODUCTIVITY GROWTH, TECHNICAL PROGRESS AND EFFICIENCY CHANGE

Productivity is the most important determinant of the standard of living of a group of people, a nation or a planet. Productivity in its simplest form is output per hour worked, and its recent slower growth rate is distressing. The great gains in standard of living have come from higher output per hour. That was true of the United States and Europe during the industrial revolution, and its true of Asia in recent years. Gain could, theoretically, have come from a change in distribution: more income going to workers, and less to owners of capital. Despite recent talk about inequality, changes in income distribution have not driven rising living standards over long periods of time. Rising incomes result from rising productivity. Note that when “productivity” is used alone, it usually refers to labor productivity, but the concept can be applied to other factors of production. We sometimes refer to energy productivity (output per unit of energy used), and factory managers look at the ratio of output produced to raw materials used. In this article we focus on GDP productivity using labor, capital and energy as inputs.

The Impacts of COVID-19 Shock on Intergenerational Income Mobility: Evidence from China.

The COVID-19 crisis has caused a huge negative shock to economic activities worldwide, leading to a reduction in income and changes in income distribution. Intergenerational mobility is an important indicator of sustainable social development. This paper explores the short-term impacts of the sudden COVID-19 pandemic on intergenerational income mobility and personal income in China. Using the variation in the number of confirmed cases across provinces, we construct a province-level pandemic intensity index and combine it with individual data from the China Family Panel Studies (CFPS). We apply a general difference-in-difference strategy to identify the causal effect of the pandemic on intergenerational income mobility. We find that personal income is positively related to parental income, and that the COVID-19 crisis has caused a decline in individual income and exacerbated intergenerational income persistence. A more intense COVID-19 pandemic shock is associated with a larger increase in intergenerational income elasticity and intergenerational income rank–rank slope. We found that with one standard deviation increase in local pandemic intensity, the intergenerational income elasticity increases by 0.315 and the intergenerational income rank–rank slope increases by 0.198 on average. The mechanism testing suggests that heterogeneous effects among different groups are the force underlying the results. Low-income, low-skilled, and low-parental-income individuals have suffered a more severe impact from the pandemic shock.

Measuring the Changes in Income Distribution of Pakistan

A continuous rise in income inequality is a highly debated theme as many changes in the structure of income distribution have happened in Pakistan. This study explores the changes in income distribution during 1998-2018 in Pakistan. The study has used PIHS 1998-99 Pakistan Social and Living Standard Measurement survey data for 2007-08, and 2018-19, collected and administrated by the Pakistan Bureau of Statistics (PBS). Oaxaca-Blinder decomposition methodology is used for estimation. The findings of the study show that education and experience significantly increase the average income. Oaxaca-Blinder decomposition indicates that the wage gaps are; 0.172 between 1998-2007, -0.062 between 2007-2018, and 0.110 between 1998-2018, and significant at a 1% significance level. The wage gap was positive between 1998-2017 and 1998-2018, implying that the wage inequality increased in that period mainly due to the coefficient component, while the wage gap was negative between 2007-2018, showing the decrease in wage inequality due to the endowment component. Moreover, the endowment component of decomposition is negative for all years of interest and highly significant except for the wage gap during 1998-2007. The coefficients component is highly significant and positive for all the years, meaning that applying the coefficients of the labor force in 2007 and 2018 to the characteristics of the labor force in 1998. The interaction component is negative during 1998-2007 and 1998-2018 whereas positive during 2007-2018 and has a high p-value, except for 1998-2018. It is recommended that government policies should ensure an equitable distribution of income.