Changes In Income Distribution Research Articles

Prospects for the world economy

Analysis here is founded on certain analogies with the Great Depression of the Thirties and four fundamental points: innovations, changes in the market forms, changes in income distribution and the sustainability of debts. The duration of prosperity depends first of all on the importance and variety of investment opportunities opened up by them, whereas crisis duration is conditioned by the size of indebtedness. The central problem in America today is precisely that of the sustainability of debts, to evaluate which criteria are studied in this paper. Full recovery will only be possible once past the stage in which firms and families contract debts primarily to repay other debts falling due and avoid bankruptcy. Proof that debts have fully reacquired the function of supporting growth will be given by the recovery of investments. In any case, the crisis is unlikely to reach the gravity of the Great Depression not only because a price fall is to excluded, but also because repetition of the mistakes in monetary policy are to be ruled out. JEL Codes: D14, E66, H63 Keywords:

EFFICIENCY WAGES, INFLATION AND GROWTH

The efficiency wage hypothesis is introduced and a work effort function is specified in which labor productivity depends on the distribution of income between wages and profits and the general level of output. The function is then incorporated in a structuralist-Keynesian growth model in which investment decisions depend on income distribution, inflation and the level of output. A ‘conflict theory of inflation’ is then developed in which wage and price change depend on real income aspirations and the rate of employment. It is, then, shown that changes in income distribution exert a direct effect, via aggregate demand, and an indirect effect, via work effort, on output and inflation. The two separate effects may be complementary or contradictory. The direction and magnitude of the overall impact on inflation and growth depends on institutional factors, such as the specification of the effort function, the different savings propensities, the determinants of capital accumulation and the state of income distribution.

Analysing Social Inequality: A Critique of Two Recent Contributions from Economics and Epidemiology

Two recent studies focusing on issues of social inequality are reviewed, one the work largely of economists, the other of epidemiologists. In both cases, the conceptualization and in turn the analysis of social inequality appear inadequate. In the case of the economists, concerned with whether, under New Labour, Britain has become a more equal society, attention is concentrated on changes in income distributions to the neglect of the distinction between the attributional and the relational aspects of inequality. The analyses presented reveal serious gaps and a lack of integration that could have been avoided through their grounding in some concept of class stratification. In the case of the epidemiologists, concerned to show a contextual effect of social inequality on population health and other outcomes, stratification is treated as one-dimensional, with no distinction being recognized between class and status. It is in fact status rather than the material inequalities associated with class that are seen as crucial in mediating the supposed contextual effect. But the inferences that are made from the available data on income distributions to inequalities of status and their consequences are often of a doubtful kind.

Modelling of Income Distribution of Czech Households in The Years 1996-2005

The choice of this paper’s topic is based on current questions related to post-Velvet Revolution development of the Czech Republic’s economy. Many important economic indexes have been changing throughout the shift from a planned to a market economy. The transformation process and the subsequent globalisation process in the EU influences the living standards of individuals and households. Current disposable income is often preferred to current consumption as a proxy for the standard of living of each member of the population (Chaudhuri and Ravallion, 1994), since it is an ex-ante measure of available resource free from preferences and constraints that could affect consumption decisions. After appropriate adjustments, income is variously interpreted as a measure of the productivity of labour and welfare of the society. Income of individuals and households is an extensively studied subject in economics. The planned form of economy prior to the Velvet Revolution was characterised by its high homogeneity of population income across social classes. After 1989, however, significant changes in income distribution of population have been occurring due to the transformation from a planned to a market economy. The impact of regional and demographic factors rises; incomes of households of pensioners and the unemployed deserve a particular attention. The significant changes that the transformation process brings about lead, among other things, to impairment of the current statistical model and discontinuation of time lines of the distribution characteristics. This situation requires a certain precaution with respect to previously valid research methods and also

Social Policy and Income Distribution: An Empirical Analysis for the Netherlands

In most OECD-countries income inequality has increased during the last two decades. In this paper, we investigate to what extent changes in the overall distribution of incomes can be attributed to social policy measures. The case for the Netherlands is particularly interesting, because the Dutch welfare state has been reformed rather fundamentally in recent years. The budget incidence analysis indicates that in the period 1981-1996 inequality of adjusted disposable household income increased sharply. The main force behind this phenomenon was a more unequal distribution of market incomes, but social transfers also explain a substantial large part of the rise in inequality. Social security reforms indeed seem to have made the income distribution less equal.The results of a more detailed analysis for 1996 on the redistributive impact of social policy and of specific social programs - using data from an unique income panel survey - can be summarised as follows:- The first five income deciles clearly gain from social security, while the higher deciles loose. Social security causes a reduction in inequality by 26 to 50 percent, depending on the indicator used.- The public old age program and the social assistance program explain by far the largest part of redistribution by the social system, while the disability and unemployment programs do not have strong redistributive effects.

Cadrisme within a Post-Keynesian Model of Growth and Distribution

The 1990s, especially in the United States, witnessed an unprecedented change in income distribution, with a large redistribution towards rentiers on the one hand, and towards the upper ranks of the managerial bureaucracy on the other hand, as became ever more obvious after the financial scandals affecting large corporations such as Enron and Worldcom. This has also been accompanied by large capital gains that benefited top-file managers as well as shareholders. Ordinary employees and workers, as a counterpart, have seen their real purchasing power stagnate. Despite all this, and in contrast to the predictions of the canonical Kaleckian growth model, many countries achieved respectable growth rates of capital and output. The purpose of the present paper is to explain this paradox and to provide a consistent post-Keynesian model of growth that would model the main features identified above, making a distinction between managerial labour, basically overhead labour, and workers, essentially direct labour – a distinction that was recommended, but never implemented by Kaldor. The model is based on target-return pricing procedures. We then study the implications of cadrisme, a managerial-friendly regime based on large pay packages for the managerial class.

Mudança na distribuição de renda brasileira: significância estatística e bem-estar econômico

Este estudo busca verificar a significância estatistica da mudanca na distribuicao de renda brasileira no periodo de 1987 a 2005. Para tanto, adotou-se uma serie de instrumentais estatisticos, destacando-se o calculo dos desvios padroes das medidas de desigualdade, o teste de Kolmogorov-Smirnov, as estimativas das densidades nao-parametricas via suavizacao por kernels e bootstrap e as dominâncias estocasticas de primeira e segunda ordens. Os resultados apontam para uma alteracao significativa no padrao distributivo. Por fim, conclui-se que as mudancas na distribuicao de renda sao condizentes comum maior nivel de bem-estar economico.

4How Globalization Affects Tax Design

The economic changes associated with globalization tighten financial pressures on governments of high‐income countries by increasing the demand for government spending while making it more costly to raise tax revenue. Greater international mobility of economic activity, and associated responsiveness of the tax base to tax rates, increase the economic distortions created by taxation. Countries with small open economies have relatively mobile tax bases; as a result, they rely much less heavily on corporate and personal income taxes than other countries. The evidence indicates that a 10% smaller population in 1999 is associated with a 1% smaller ratio of personal and corporate income tax collections to total tax revenues. Governments of small countries instead rely on consumption‐type taxes, including taxes on sales of goods and services and import tariffs, much more heavily than larger countries do. Since the rapid pace of globalization implies that all countries are becoming small open economies, this evidence suggests that the use of expenditure taxes is likely to increase, posing challenges to governments concerned about recent changes in income distribution.

Does Economic Integration Process Matter for Income Inequality in Central and Eastern European Countries?

Economic integration can be defined as the expansion of markets from the national to the regional or to the world level. Therefore, two channels of market integration can be determined: regional integration, for instance, within the EU, and globalization. The purpose of this paper is to investigate the impact of the economic integration process on differences in income among and within Central and Eastern European countries (CEECs). The hypotheses on 1) the economic integration relevance and 2) the mechanisms through economic integration affecting income inequality are tested with data on 10 CEECs (Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, Slovenia, Romania) for the 2000-2006 period. An unbalanced panel induces to estimate Random-effects regressions and fixed-effects regressions. The results show that globalization contributed significantly to income inequality among CEECs as well as to the upward trend in income inequality within the societies of these countries, while regional integration with and within the EU did not explain considerably the changes in income distribution over the study period.

Income Distribution in Venezuela Post Hugo Chavez

Unequal distribution of income is of high concern especially in the region of Latin America. President Hugo Chavez of Venezuela promised when he was elected president 1998 that he would eradicate poverty and increase standard of living through 21st Century Socialism. The purpose of this paper is to analyze the changes in income distribution since the Socialist president has been in power.

Institutions, Trade, and Social Cohesion in Fragile States

This paper examines the contribution of institutions, social cohesion, and trade to development per-capita income) with an emphasis on fragile states in Africa. Results from Arellano-Bond GMM estimations suggest that political institutions, openness to trade, and social cohesion affect growth in fragile states via direct and indirect mechanisms. The results indicate that, beyond certain level, openness to trade may actually be harmful to economic performance in fragile states, particularly in countries with high export concentration. Improvements in institutional quality, or more specifically in democratization, also may be harmful in the short run. On the other hand, social cohesion has a positive effect once a threshold level is reached. The results associated with the effects of political institutions and openness to trade seem to suggest the possibility of a 'catch-22', at least in the short run. If a fragile state tries to improve its political institutions or its openness to trade it may wind up with lower per-capita income. According to the formula used to allocate World Bank-IDA funds, such a country would get more aid. However, while obtaining more aid may be a good outcome, lower income implies more poverty (assuming no changes in income distribution). Thus, aid may not lead to significant poverty reduction.

Demand effects of the falling wage share in Austria

This paper aims at empirically estimating the demand effects of changes in functional income distribution for Austria. Based on a Post-Kaleckian macro model, this paper estimates the effects of a change in the wage share on the main demand aggregates. The results for the behavioral functions for consumption, investment, prices, exports and imports are compared with the specifications of the WIFO macro model and the IHS macro model. A reduction in the wage share has a restrictive effect on domestic demand as consumption decreases more strongly than investment increases. Because of the strong effects on net exports the overall effects of a decrease in the wage share are expansionary. However the latter effect operates only as far as the fall in the wage share increases competitiveness. As wage shares were also falling in Austria’s main trading partners, the effect seems to have been neutralized.

Rising household debt: Its causes and macroeconomic implications--a long-period analysis

The article analyses the rise in household indebtedness from the point of view of its causes and long-run macroeconomic implications. The analysis is focussed on the US case. Differently from life-cycle interpretations of the phenomenon, and from interpretations in terms of erratic deviations of current income flows from their long-run trend, the rising household debt is viewed as the outcome of persistent changes in income distribution and growing income inequalities. Through household debt, low wages appear to have been brought to coexist with relatively high levels of aggregate demand, thus providing the solution to the contradiction between the necessity of high and rising consumption levels, for the growth of the system's actual output, and a framework of antagonistic conditions of distribution which keeps within limits the real income of the vast majority of society. The question of the long-run sustainability of this substitution of loans for wages is finally discussed. Copyright The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Income Inequality in Malaysia*

The objective of this paper is to examine the changes in Malaysian income distribution during the last three and a half decades and the reasons for the changes. It was found that the Gini ratio for Malaysia peaked in 1976 and fell thereafter to 1990. However, inequality seems to reverse its direction since then. Policies that could explain the changes in income distribution include the promotion of export‐oriented industrialization, education, and training, and the restructuring of equity ownership and assistance in asset accumulation. While the various other redistributive measures in the form of rural development helped in poverty eradication, their effectiveness in redistribution needs to be improved. Several hypotheses have been forwarded to explain the widening of income inequality after 1990. These include the difference in the growth rates of incomes of the rural and urban areas, trade and globalization, and impediments to the process of internal migration.

A dwindling middle class? Italian evidence in the 2000s

In recent years, increasing attention has been paid to household impoverishment in Italy. Most of previous analyses dealing with this issue are based on summary statistics, which may not capture the whole income distribution. This paper employs a non-parametric tool, the “relative distribution”, to describe patterns of changes in the entire Italian household income distribution over the period 2000–2004. This approach also allows for a decomposition of the relative density to isolate changes due to differences in location from changes due to differences in shape, thus enabling deeper analysis of income polarization. During the 2000s there was a significant location effect, and also increased income polarization, which has particularly affected incomes below the median. Analyses by social groups, according to the employment status of the household head, show significant re-distribution effects within groups.

Labour Values, Prices of Production and the Effects of Income Distribution: Evidence from the Greek Economy

This paper explores the relationship between labour values, prices of production and changes in income distribution in an actual economy. For this purpose we use a linear model of production with circulating capital and homogeneous labour, assuming that wages are paid ex ante. On the basis of this model and data from input–output tables of the Greek economy for the period 1988–1997 we estimate the labour values and prices of production, which are normalized with the use of the Sraffian standard commodity and the actual output vector. Furthermore, we extend Steedman's polynomial approximation of prices of production to include the case where wages are paid ex ante and the accuracy of this approximation is tested with actual input–output data. Finally, we find that prices of production change as a result of hypothetical changes in income distribution more often than not in a monotonic way and in a few cases display curvatures that reverse the order between prices of production and values.

Mobility and Mean Reversion in the Dynamics of Regional Inequality

The literature on regional growth convergence and economic disparities has tended to confound four interwoven measurement phenomena: 1) mean reversion (so-called beta convergence)—richer regions move towards the average from above and poorer regions from below; 2) diminishing inequality (so called sigma convergence)—the horizontal or spatial distribution of income becomes more equal; 3) mobility—the rank of a region in the overall distribution of income changes either upwards or downwards; and 4) leveling—the richer regions become poorer (leveling-down) or the poorer regions become richer (leveling-up). We use a new statistical methodology that treats these four phenomena on an integrated basis. The methodology is applied to Israeli regional earnings. We show that regional earnings are Gini divergent, but after adjusting earnings for regional cost-of-living differential, this picture is reversed. In the absence of genuine cost-of-living data, a simple and practical method is proposed, whereby regional house price data are used to proxy regional cost-of-living differentials.

GDP per capita or real wages? Making sense of conflicting views on pre-industrial Europe

This paper studies the apparent inconsistency between the evolution of GDP per capita and real wages in pre-industrial Europe. We show that these two measures will diverge when any of the three following factors are present: changes in income distribution, changes in labour supply per capita and changes in relative prices. We propose a methodology for measuring the effects of these three factors and apply it to the case of 18th century England. For this particular episode the gap between the growth of GDP per capita and real wages can be successfully explained and the main explanatory factor is changes in labour supply per capita. Some further conclusions are drawn from the experience of England during the 19th century and Europe during the early modern period.

The problems of relative deprivation: Why some societies do better than others

In this paper, we present evidence which suggests that key processes of social status differentiation, affecting health and numerous other social outcomes, take place at the societal level. Understanding them seems likely to involve analyses and comparisons of whole societies. Using income inequality as an indicator and determinant of the scale of socioeconomic stratification in a society, we show that many problems associated with relative deprivation are more prevalent in more unequal societies. We summarise previously published evidence suggesting that this may be true of morbidity and mortality, obesity, teenage birth rates, mental illness, homicide, low trust, low social capital, hostility, and racism. To these we add new analyses which suggest that this is also true of poor educational performance among school children, the proportion of the population imprisoned, drug overdose mortality and low social mobility. That ill health and a wide range of other social problems associated with social status within societies are also more common in more unequal societies, may imply that income inequality is central to the creation of the apparently deep-seated social problems associated with poverty, relative deprivation or low social status. We suggest that the degree of material inequality in a society may not only be central to the social forces involved in national patterns of social stratification, but also that many of the problems related to low social status may be amenable to changes in income distribution. If the prevalence of these problems varies so much from society to society according to differences in income distribution, it suggests that the familiar social gradients in health and other outcomes are unlikely to result from social mobility sorting people merely by prior characteristics. Instead, the picture suggests that their frequency in a population is affected by the scale of social stratification that differs substantially from one society to another.

Can Africa Reduce Poverty by Half by 2015?

This article uses simulations to explore the possibility of halving the number of people in Africa living in extreme poverty by 2015. It shows that initial levels of inequality and per capita consumption determine the cumulative growth and reductions in inequality required to achieve this target, and finds that on average Africa needs only a relatively modest annual rate of growth in per capita household consumption, if inequality remains unchanged. The trade‐off between the two varies greatly among countries, and their policy choices are thus quite different: in some cases small changes in income distribution can have a large effect on poverty, while in others a strong focus on growth is the only viable option.