Changes In Income Distribution Research Articles

Financial Development, Inequality and Poverty: Some International Evidence

This paper provides evidence on the link between financial development and income distribution. Several dimensions of financial development are considered: financial access, efficiency, stability, and liberalization. Each aspect is represented by two indicators: one related to financial institutions, and the other to financial markets. Using a sample of 143 countries from 1961 to 2011, the paper finds that four of the five dimensions of financial development can significantly reduce income inequality and poverty, except financial liberalization, which tends to exacerbate them. Also, banking sector development tends to provide a more significant impact on changing income distribution than stock market development. Together, these findings are consistent with the view that macroeconomic stability and reforms that strengthen creditor rights, contract enforcement, and financial institution regulation are needed to ensure that financial development and liberalization fully support the reduction of poverty and income equality.

Counterfactual Distributions in Bivariate Models—A Conditional Quantile Approach

This paper proposes a methodology to incorporate bivariate models in numerical computations of counterfactual distributions. The proposal is to extend the works of Machado and Mata (2005) and Melly (2005) using the grid method to generate pairs of random variables. This contribution allows incorporating the effect of intra-household decision making in counterfactual decompositions of changes in income distribution. An application using data from five latin american countries shows that this approach substantially improves the goodness of fit to the empirical distribution. However, the exercise of decomposition is less conclusive about the performance of the method, which essentially depends on the sample size and the accuracy of the regression model.

Growth and Distribution in Heterodox Models with Managers and Financiers

AbstractHeterodox models of income distribution and growth generally have two classes: workers and capitalists. However, recent discussions of inequality have drawn attention to changes in income distribution due to wage inequality and to an increase in the income and wealth of the top income group. To take these changes into account, this paper uses a simple two‐group framework to develop simple classical‐Marxian and post‐Keynesian‐Kaleckian models, in which one group consists of production workers who also own capital and another group consists of managers and financiers, as well as traditional capitalists, to analyze the determinants and growth implications of distributional changes.

Bassa crescita dell'economia o elevato sviluppo del settore finanziario? Alcune annotazioni sul recente libro di Piketty

The paper deals with the role of the expansion of the financial sector in the recent increase in income inequality. It first considers the positions presented by Piketty in his recent book on this theme, criticising his neglect of role of the financial sector and his view that the low growth of the economy is inevitably and is not related to the changes in income distribution. Then it presents some analyses to show that the size of the financial sector affects the distribution of income between social groups. By using these analyses, the paper proposes an interpretation of the role of the financial industry in the recent changes in income inequality and in the burst of the recent financial crisis.

Linking functional with personal income distribution: a stock-flow consistent approach

This paper develops a benchmark stock-flow consistent model that links functional with personal income distribution. The model consists of various household groups that receive income from different sources or from the same sources in different proportions. The dynamic linkage between functional and personal income distribution is formulated as part of a complete macroeconomic system. Inequality decomposition techniques are employed to associate income sources with personal income distribution. Simulation exercises are conducted to reveal the various ways through which functional and personal income distribution interact. In the simulations, a rise in the exogenous component of low-skilled workers’ wage share reduces inequality in the short run; in the medium to long run inequality starts increasing due to certain macroeconomic developments, but remains lower than its initial level in almost all cases. A change in functional income distribution due to a rise in the dividend payout ratio of firms increases inequality both in the short run and the long run.

THE ORIGINS OF INEQUALITY, AND POLICIES TO CONTAIN IT

This paper critiques the notion that unfettered inequality is an inevitable consequence of contemporary capitalism, and provides an alternative, new framework for analyzing changes in income and wealth distribution. By thinking of these distributions as the result of changing centrifugal and centripetal economic and political forces, we can identify changes in our economic and social structure that may have played a central role in the creation of today’s high level of inequality, and we can analyze the potential impacts of alternative policies. Specifically, I suggest that much of the increase in inequality is associated with the growth in rents — including land and exploitation rents (e.g., arising from monopoly power and political influence).

A positive theory of economic growth and the distribution of income

This paper is a positive theory of the distribution of income and the growth rate of the economy. It builds on our earlier work (Meltzer and Richard, 1981) on the size of government. How does the distribution of income change as an economy grows? To answer this question we build a model of a labor economy in which consumers have diverse productivity. The government imposes a linear income tax which funds equal per capita redistribution. The tax rate is set in a sequence of single issue election in which the median productivity individual is decisive. Economic growth is the result of using a learning by doing technology, so higher taxes discourage labor causing the growth rate of the economy to fall. The distribution of productivity can widen due to an exogenous increase in technological specialization. This causes voters to raise the equilibrium tax rate and reduce growth. The distribution of pre-tax income widens. We calibrate the model using data from the U.S., U.K. and France. The results of the calibration show that the model is consistent with the facts about changes in income distribution over time in developed countries.

The effects of location-based tax policies on the distribution of household income: Evidence from the federal Empowerment Zone program

Location-based tax policies are redistributive as evidenced by their placement in distressed areas. However, the previous literature has focused on mean effects which can mask important effects that the program has on the distribution of households. Therefore, we extend the literature by studying changes in the entire household income distribution, in the context of the federal Empowerment Zone (EZ) program. We do not find evidence that the impoverished residents benefited from the program. Our findings are consistent with the areas becoming more attractive to high-income households. The improvements in the areas were concentrated in those portions of each zone that were relatively better-off prior to EZ designation. The results confirm the prior literature findings that the areas, on average, became more attractive but also suggest that the benefits of the program likely did not accrue to the lower-income residents of the EZ areas.

Connecting Patterns of Technical Change and Income Inequality

:This paper studies the empirical relationship between patterns of technical change and income inequality from historical and political economy perspectives. Growth distribution schedules are constructed to determine the type of technical change undergone in a sample of Latin American countries from 1963 to 2008. Such patterns of technical change can be grouped into redistributive and nonredistributive. The expected theoretical relation under redistributive patterns of technical change is that income inequality should decrease when this type of pattern emerges. The study empirically verifies that this relationship emerges in several periods, but this outcome is only one of the possible results of the complex interaction between patterns of technical change and historical economic and political events. Combining our study of patterns of technical change with economic history reveals that the role of political and economic coalitions needs to be incorporated to understand the complex forces that determine changes in income distribution. The study concludes with provisions of a framework for understanding changes in income distribution during different episodes in our period of analysis, ranging from the era of military dictatorship to the most recent period. We highlight some policy implications that can be drawn from this framework.

Relative Social Status and Conflicting Measures of Poverty: A Behavioral Analytical Model

We consider a situation where the relatively ‘poor’ are concerned about their relative income status with respect to a relevant reference group. Such a concern is explicitly introduced in a utility function to study the consumption behavior of the poor. We point towards a possible conflict between income based and nutrition-based measure of poverty. Changes in income distribution generate non-homothetic outcome for an “otherwise homothetic” preference structure and may convert an “otherwise normal” good into an inferior good.

Labor Share Trends in Three Baltic Countries: Literature Review and Empirical Evidence

Long-term stability of relative shares of production factors – labor and capital – was an implied fact for a long time. However, recently empirical data have become available, and several authors have presented a conclusive evidence showing a worldwide decline in labor share, which is especially manifested in Continental Europe.Despite the recent scientific interest in the stability of labor share, the trend analysis for small open economies such as the Baltic countries is very limited in the scientific literature. Therefore, this article aims at analyzing theoretical literature and empirical evidences on the changes in functional income distribution with the focus on the Baltic countries while also providing interpretations of the possible causes for this shift. Authors primarily focus on labor share trends in Lithuania, Latvia, and Estonia, while stressing the importance of the correct measurement of this indicator.

A Large-Scale Mapping of Territorial Development Dynamics in Latin America

Summary This paper summarizes a study of changes in per-capita income, monetary poverty, and income distribution in 9,045 subnational administrative units of nine Latin American countries between the mid-1990s and mid-2000s. The results largely support spatial convergence of mean household incomes, although the estimates indicate it has been slow. Territorial inequality is found to be persistent and reduces the pro-poor effect of local income growth. Although national-context specific, the estimates also indicate that territorial development dynamics are influenced by the structural features of the territories. In view of the evidence, territorial development policies in Latin America seem well warranted.

Ffects of the Demographic Changes on Private Consumption: An Almost Ideal Demand System Analysis for Austria

Abstract: The following paper analyzes potential effects of the demographic changes on private consumption. An extended Almost Ideal Demand System is used to simulate changes in the consumption of goods and services due to the ageing of the population in Austria – on national as well as regional level. Therefore, age-specific income elasticity and price elasticity are estimated. The estimated model is used to simulate the consumption structure in 2030 for four scenarios: Firstly, only the ageing process of the population is considered. Secondly, the ageing as well as changes in household structure are taken into account. Scenario three and four furthermore consider potential changes in income distribution due to the ageing as well as price changes and its effects on the consumption structure of the ageing society. The results reveal direct positive effects of the ageing of the population on the consumption shares of food and non-alcoholic beverages, housing, water and fuel, health, as well as miscellaneous goods and services, while the consumption category transport looses the highest proportion in total consumption. But it can also be seen that these results do not hold anymore as soon as potential changes in income distribution – as indirect effect of the ageing – are considered.

Anticipating impacts on health based on changes in income inequality caused by life cycles

This paper presents a general impact assessment relationship, intended to contribute to the development of social life cycle analysis. This relationship and the conditions of its use are called the “Wilkinson pathway”. When used for comparisons, the pathway assesses the anticipated change in the infant mortality rate caused by a change in income distribution in the population of a country, itself generated by an important change in a life cycle. Since the 1980s, numerous authors have examined the relationship between income inequality and human health. Without formally proving so, these studies suggest that increases in inequality have negative consequences for health. First, this effect is re-examined using the most up-to-date time series data. Econometric modelling allowed calculating the coefficients of variation of infant mortality in relation to variations in income inequality for member and non-member Organisation for Economic Cooperation and Development (OECD) countries, taking into account the lag time. Then, a method to translate the effect of an important economic change in a life cycle on income distribution is proposed. The econometric estimations show that a 1 % variation in income inequality leads to an approximately equivalent variation, with a lag time of about 15 years, in infant mortality in OECD member countries. The effect is two times larger than in non-OECD member countries. Together with input-output data, labour productivity and average wages in different economic sectors, this information makes it possible to quantify the probable effects of an important change in the life cycle production stage on income inequality and then infant mortality. Due to data constraints and the many assumptions made, the tools and results presented here should be used and interpreted cautiously. Above all, what is involved is a comparative method. An isolated result must not be interpreted in absolute terms. This work is in line with efforts to formalize general pathways allowing a comparison of socioeconomic impacts linked to various important changes in the production stage of life cycles. There are diverse prospects for improvement. A challenge for further research will be to propose methods enabling assessments of the socioeconomic impacts generated in life cycle stages other than production.

An Application of Gamma Distribution to the Income Distribution and the Estimation of Potential Food Demand Functions

Poverty and hunger are the central issues against the sustainable development. Today, more than 800 million people are suffering from insufficient nutrition according to FAO (FAO, 2010). However, on the other hand, it is often pointed out that the per capita food production already meets the demand for the per capita food requirement. The above contradictory observation suggests that many people cannot access the food market because of the low income. The availability of electricity and other energy is also the case. Since these issues are mainly caused by the inequity of income distribution, its quantitative analysis is indispensable to evaluate the societal policy towards the sustainable future. However, since the existing indicators such as Gini coefficients do not represent the income distribution explicitly, they fail to assess the effects of social policy for the improvement of purchasing power of poor people. Population of absolute poverty who gets less than 1.25 US dollar per day is also provided by World Bank. This indicator does not show the distribution pattern of middle to high income classes. The authors would thus point out the need for an alternative method. This paper describes an application of Gamma distribution to the income distribution patterns. The parameters are statistically estimated based on the income quintile data provided by World Bank. The results show how the income distribution has changed historically by country. Based on the future income distribution and the simulation results of the author’s crop market model, we evaluate the share of people who cannot afford the major crop. The authors also propose a procedure to estimate the potential food demand function considering the income distribution changes, suggesting that the future demand could be affected by not only the per-capita income growth but the income distribution changes.

Inequality of Income Distribution and Economics Growth in the Regions of Russia in the Post-Crisis Period

Income distribution is one of the factors influencing economic growth. At present time, the regional aspect of such influence is an important sphere of research. The present article is intended to view the aspects of the influence of income distribution differentiation on economic growth on the example of the Russian regions in post-crisis period. The research results are presented in the form of regression model, estimating the differences in the growth rates of gross regional products in Russia in post-crisis 2010. The explanatory variables are Gini coefficients as an indicator of income inequality, and a number of other indicators characterizing the regional development in 2006 — 2010. Special attention is paid to the influence of 2008 crisis on the differences of regions by the level of dependent variable. Cross-sectional regression model based on the Russian Federation regions data shows the positive influence of changes in income distribution on the rate of economic growth. The general result of the research is confirmation of the hypothesis of the influence of income inequality on economic growth at the regional level in Russia. The observed effect is positive and statistically significant. The effect is relatively short-term, both from the point of view of the dependent variable (the yearly growth rate of GRP is used in the model), and from the point of view of the time lag between the year of dependent variable observation, 2010, and the period of observation, for which the Gini coefficient is significant in regression equation (2006-2007). Pre-crisis value of the Gini coefficient does not determined the differences in economic growth in the regions of Russia in 2011-2012. The results can be used in predicting the pace of regional development in Russia in the post-crisis period, as well as in the implementation of regional economic policy in times of crisis in order to maximize regional economic growth after the crisis.

Recent Trends in Income Redistribution in Australia: Can Changes in the Tax‐Benefit System Account for the Decline in Redistribution?

We examine trends in the redistributive impact of the tax‐benefit system in Australia between 1994 and 2009 using a framework that allows us to separate the contributions of taxes, benefits, and taxes and benefits combined. Furthermore, we identify the effect of tax‐benefit policy reforms on income redistribution over the period. We find that after reaching a peak value in the late 1990s, the redistributive effect of taxes and benefits declined sharply. Although reforms to the tax‐benefit system contributed to the decline in redistribution, their contribution was limited compared to the role played by the changes in market income distribution.

Understanding Changes in the Distribution and Redistribution of Income: A Unifying Decomposition Framework

In recent decades income inequality has increased in many developed countries but the role of tax and transfer reforms is often poorly understood. We propose a new method allowing for the decomposition of historical changes in income distribution and redistribution measures into: (i) the immediate effect of tax‐transfer policy reforms in the absence of behavioral responses; (ii) the effect of labor supply responses induced by these reforms; and (iii) a third component allowing us to explore the effect of changes in the distribution of a wide range of determinants, including the effect of employment changes not induced by policy reforms. The application of the decomposition to Australia reveals that the direct effect of tax‐transfer policy reforms accounts for half of the observed increase in income inequality between 1999 and 2008, while the increased dispersion of wages and capital incomes also played an important role.

Ekonomi Pembangunan Terhadap Pengangguran di Provinsi Jambi

Unemployment in developing countries such as Indonesia, the economic development of this country as a growing number of unemployment is a problem that is more complicated and more serious than the problem of changes in income distribution are less profitable low-income residents
 Unemployment in Jambi Province has reached tens of thousands of people is an urgent problem that must be solved because of the impact of unemployment it would be very dangerous to the social order of life. It is a fact that various social evils such as theft / muggings/robberies, prostitution, Jula buy children, street children and others merupakandampakdaripengangguran.

Demand and structural change in Adam Smith's view of economic progress

Previous studies suggest that demand forces (as well as widely accepted supply-side factors) work in Smith’s ‘historical’ account of economic development. Expanding on this line of inquiry and yet giving corrections of misinterpretations, this article claims that ‘endogenous’ demand is at play in Smith’s theory of natural progress, providing a historical case study of early modern England for an illustration of the demand-based model of natural progress. Smith drew attention to the dynamics of growth with respect to the role of demand and the changing sectoral structure of economies in the model of natural progress as well as in that of historical progress. In this vein, Smith’s approach to economic development differs from Hume’s historical account of it. First, it is significant that Smith was concerned with a change in income distribution and expenditure pattern brought about by economic growth. With the general expansion of income, changes in patterns of income distribution and consumption (i.e., a larger share of wages and profits in national income at later stages of development) that favour manufactured items boost economic growth and lead an agrarian economy to move towards manufacturing and commercial economies. Second, it is now worth noticing that along with the progress of wealth an endogenous demand grounded on a part played by socio-psychological power as distinct from material motives furnishes a taste for manufactured goods more than for agricultural goods.