Income Distribution In Countries Research Articles

Does international trade lead to uneven development or convergent growth?

This study presents a model of North–South trade and development and investigates the growth rates of two countries under a trade pattern that the North specializes in investment goods while the South specializes in consumption goods. Many studies on North–South trade conclude that both countries' growth rates are equalized in the long run. Conversely, we show that if the ‘comparative advantage’ is explicitly considered, both countries' growth rates are not equalized in some cases and, hence, the South cannot catch up with the North even in the long run. Unlike many previous studies, we close the model by fixing each country's income distribution and making the price and quantity variables interdependent. Our results show that the growth rates of both countries are equalized in the long run if their trade patterns are fixed, irrespective of their comparative advantages, whereas their growth rates are not equalized in some cases if their trade patterns are determined by the comparative advantage principle.

Do natural resources lead to a curse or blessing in terms of income inequality?

This study examines the effects of the revenues generated by the extraction of natural resource reserves on income distribution in countries with natural resource reserves. The theoretical underpinning is based on the view that natural resources, which are defined in the literature as the natural resources curse, cause many adverse macroeconomic and political effects on countries' natural resource discoveries and revenues from extracted natural resources. The study aims to investigate whether natural resources have adverse effects on income inequality for countries with higher revenues of natural resources and abundant natural resources. For this purpose, we perform estimations using the system GMM estimator for low-income, lower-middle-income and natural resources-rich countries in the period 2009–2019. We find an inverted U-shaped relationship between natural resource rent and income inequality. In other words, natural resource rent has a cursing effect up to a threshold, then it has a blessing effect on income inequality. We also find an inverted U-shaped relationship between economic growth and income inequality. Additionally, the rule of law has a negative effect on income inequality.

Investigating the Connection Between Income Inequality and Economic Expansion

Since the Kuznets curve theory was published, more and more researchers have explored the relationship between 2 elements (economic growth and income inequality), such as whether income inequality has a good or bad impact on a country's economic growth. Because each researcher uses different methods and data, so there are different conclusions for the statement. Some researchers show that economic growth will not be influence by a growth of income inequality in the short term, but when a country is in a long-term income inequality, this situation will make the gap between rich and poor wider and wider. Research scholars recommended that the government should pay attention to the country's income distribution. This paper uses the collected data to build a multi-linear regression model to explore which factor has the greatest impacts on income inequality, as well as to investigate the connection between the two factors (economic growth and income disparity). The main element, according to this paper's findings, is GDP, and there is an inverse relationship between the two. When the economy grows, the degree of income inequality rises, but when the economy grows to a certain value, the degree of income inequality will decrease with economic growth.

Digital Economy, Industrial Structure and Income Inequality

As a distinctive feature of contemporary social development, digital economy will inevitably affect the typical fact of income inequality. This paper theoretically sorts out the influence mechanism between digital economy, industrial structure and income inequality, and conducts empirical research based on cross-border panel data from 49 countries from 2010 to 2020. The results show that the development of digital economy significantly alleviates income inequality. The digital economy indirectly narrows the income gap by promoting the advanced and rational industrial structure; The mitigating effect of the digital economy in countries with higher levels of income inequality is more pronounced than in countries with low levels of income inequality, but when the country's income distribution falls into extreme inequality, the positive effect of the digital economy in reducing income inequality is minimal.

Human Capital Index Value and Income Distributions in the Countries in the Europe and Central Asia Region: The Case of Turkey

Educational indicators offer a straightforward means of gauging a country's education. Besides, evaluation based on these indicators is of great significance and value. Nonetheless, education does not take place in a vacuum, and thus these indicators are results of the conditions in a country. Particularly, time and money spent on education, the family's share in economic distribution play a role in determining the current state of education. So, this study aims to evaluate the current state of education in Turkey by examining human capital indices and income distribution in countries in the Europe and Central Asia (ECA) region. For this purpose, the study uses data from the World Bank. The results of the study indicate that children born in developed countries can access near 80% of their potential upon reaching their productive age, compared to only 65% in Turkey. Additionally, Turkey has the greatest degree of income inequality, as indicated by its GINI coefficients, among other countries in the ECA region. Moreover, there are vast disparities between the income of the top 20% and the bottom 20% of Turkey’s population.

The effects of asset prices on income inequality: Redistribution policy does matter

Income inequality in some developed countries has been steadily increasing over the past two decades, contrasting Kuznets' hypothesis that income inequality will improve after a certain income level. During that same period, asset prices rose significantly, blamed for increases in inequality. Are rising asset prices really the cause of rising inequality? Using the data of 32 developed countries across 1980–2018, this research empirically reveals that a country's stance toward redistribution significantly determines whether asset prices affect income inequality. The results indicate that an increase in house prices significantly increases income inequality in countries with weak income redistribution policies, while asset prices do not affect income distribution in countries with strong redistribution policies. An improvement in income inequality does not occur spontaneously but requires active government intervention.

Income inequality and trade of ‘Made in China’

This paper presents a theory and empirical evidence on how destination countries’ income inequality affects the export price and volume of Chinese products. We provide a simple model to illustrate exporters’ market dynamics and product-quality specialization induced by the change in the destination country's income distribution. Under the nonhomothetic preference assumption, the model predicts that higher income inequality makes Chinese exporters who produce low-quality products concentrate on serving low-income consumers, which accounts for a large proportion of the population. Exploiting highly disaggregated customs transaction records of Chinese exporters, we provide empirical evidence consistent with the model predictions: (i) A rise in income inequality leads to a lower export price, (ii) induces entry of new exporters, and (iii) leads to higher export value and export price dispersion.

Polarization and the middle class in China: A non-parametric evaluation using CHNS and CHIP data

Since the 1990s, and until the beginning of the second decade of the XXIth century, record economic growth in the PRC has been inclusive (as virtually all social groups experienced sizeable well-being improvements in an absolute terms). Yet, it has been accompanied by an increase in both income inequalities and polarization.To jointly explore these phenomena, we apply the Relative Distribution tool on different datasets. This technique allows to statistically isolate and analyze separately the pure growth and the pure distributional components, or effects, of the overall societal income evolution process.Our main result shows a hollowing out of the mid-range deciles - i..e, the (national) middle class, understood by definition as the central ones of a country's income distribution function - with a corresponding fattening of the highest and lowest ones. Trends in "pure distribution" (i.e., the shape effect) show the emergence of a typical polarization profile.This key finding does not contradict the stylized fact that such a (negative) "pure distributional" trend has been “countered” by impressive GDP growth. The latter has led an ever-increasing and now ample share of China's population to join the ranks of the global middle class - a popular declination of the middle class concept with its own merits, yet totally distinct to the national one mentioned above.11On the growing number of Chinese households joining the global middle class see, among others, Li He 2006, Cheng Li (ed.) 2010, Zhang Yuan, Guanghua Wan, and NinyKhor 2011, Tsang 2014, Rocca 2017, Sicular , Gustafsson and Xiuna Yang 2017.We need to take both growth effects and shape effects over time into consideration for a proper political economic assessment of Chinese economic performance. As growth slows, unless countervailing policies are undertaken, polarization might reveal itself more sharply, increasing the risk of social conflicts. To avoid such an unwelcome outcome, focused anti-polarization actions are warranted, along with policies aiming at achieving a more egalitarian growth pattern.

Economic Complexity and Income Inequality: Does Country Risk Matter?

This research sets out to determine the nexus among economic complexity (ECI; which reflects a country’s productivity), income inequality, and country risk and whether country risk affects the complexity-inequality nexus. By applying balanced panel data of 43 countries from 1991 to 2016 to a data-driven econometric methodology-finite mixture model, we provide fresh insight into this relationship from the perspective of country risk. The results indicate that the two-group finite mixture model is able to best fit our data, and that increasing economic complexity has no impact on income inequality in group A, whereas improving the structure of productivity mitigates the income gap in group B. Furthermore, country risk and the subcomponents of the former (i.e., economic risk, financial risk, and political risk) all exert effects on the complexity-inequality nexus. Specifically speaking, an increase in ECI is associated with more equal income distribution in a country with low country risk, while the improvement in productive structure cannot improve an unequal income distribution in countries under high country risk. Finally, it is noteworthy that the finite mixture model also captures information about the transformation of this nexus, with evidence demonstrating that 5 countries experience a variation in their complexity-inequality relationship over the sample period.

Measuring economic efficiency using inverse-optimum weights

This paper provides a method to measure the traditional Kaldor-Hicks notion of “economic efficiency” when taxes affect behavior. In contrast to traditional unweighted surplus, measuring efficiency requires weighting individual benefits (or surplus) by the marginal cost to the government of providing a $1 transfer at each income level. These weights correspond to the solution to the “inverse-optimum” program in the optimal tax literature: they are the social planning weights that would rationalize the status quo tax schedule as optimal. I estimate the weights using the universe of US income tax returns from 2012. The results suggest that measuring economic efficiency requires weighting surplus accruing to the poor roughly 1.5–2 times more than surplus accruing to the rich. This is because $1 of surplus to the poor can be turned into roughly $1.5–$2 of surplus to the rich by reducing the progressivity of the tax schedule. Following Kaldor and Hicks' original applications, I compare income distributions over time in the US and across countries. The results suggest US economic growth is 15–20% lower due to increased inequality than is suggested by changes in GDP. Because of its higher inequality, the U.S. is unable to replicate the income distribution of countries like Austria and the Netherlands, despite having higher national income per capita.

Reallocating Public Spending to Reduce Income Inequality

Can a government reduce income inequality by changing the composition of public spending while keeping the total level of expenditure fixed? Using newly assembled data on spending composition for 83 countries across all income groups, this paper shows that reallocating spending toward social protection and infrastructure is associated with reduced income inequality, particularly when it is financed through cuts in defense spending. However, the political and security situation matters. The analysis does not find evidence that lowering defense spending to finance infrastructure and social outlays improves income distribution in countries with weak institutions and at higher risk of conflict. Reallocating social protection and infrastructure spending towards other types of spending tends to increase income inequality. Accounting for the long-term impact of health spending, and particularly education spending, helps to better capture the equalizing effects of these expenditures. The paper includes a discussion of the implications of the findings for Indonesia, a major emerging market where income inequality is at the center of policy issues.

Factors Affecting Income Distribution in High-Income Countries

The study reveals the causes of inequality of income distribution in high-income countries. In the research, the macroeconomic factors affecting income distribution such as economic growth rate, inflation, unemployment, globalization, technology and public revenues are considered as independent variables. The gini coefficient, which is one of the methods of measuring income inequality, is considered as dependent variable. Dummy variable is also included as an independent variable to the model to eliminate the effects of the global crisis that started in the United States in 2008 and spread all over the world. In the study, which is based on the 2008-2015 period, high-income countries are considered and the factors affecting income distribution are examined by panel data analysis. According to the findings of analysis, it is seen that inflation, economic growth, unemployment and public revenues increase income inequality in high income countries and economic globalization contributes to the improvement of income distribution in these countries. The shadow variable added to the model is also statistically significant. This shows that the crisis has a negative effect on income distribution in high-income countries.

Inferential results for a new measure of inequality

Summary In recent decades, substantial changes have been observed in the left and right tails of income distributions in countries like the USA, Germany, the UK, and France. These changes are a major concern for policy makers. Here, we derive inferential results for a new inequality index that is specifically designed for capturing such significant shifts. We propose two empirical estimators for the index and show that they are asymptotically equivalent. Afterward, we adopt one estimator and prove its consistency and asymptotic normality. Finally, we introduce an empirical estimator for its variance and provide conditions for its consistency. An analysis of real data from the Bank of Italy Survey of Income and Wealth is also presented on the basis of the obtained inferential results.

Reallocating Public Spending to Reduce Income Inequality: Can it Work?

Can a government reduce income inequality by changing the composition of public spending while keeping the total level of expenditure fixed? Using newly assembled data on spending composition for 83 countries across all income groups, this paper shows that reallocating spending toward social protection and infrastructure is associated with reduced income inequality, particularly when it is financed through cuts in defense spending. However, the political and security situation matters. The analysis does not find evidence that lowering defense spending to finance infrastructure and social outlays improves income distribution in countries with weak institutions and at higher risk of conflict. Reallocating social protection and infrastructure spending towards other types of spending tends to increase income inequality. Accounting for the long-term impact of health spending, and particularly education spending, helps to better capture the equalizing effects of these expenditures. The paper includes a discussion of the implications of the findings for Indonesia, a major emerging market where income inequality is at the center of policy issues.

Income distribution and environmental quality in China: A spatial econometric perspective

Paying heed to a surge of concern about the serious and continuous environmental degradation that is currently being witnessed in China, in this paper we investigate whether income distribution contributes to environmental deterioration. Environmental degradation can be linked not only to income growth, we argue, but also to increases in income inequality. The study calculated the Gini coefficient of 31 province using a data set of 403 city level data in mainland China and estimated the linkage between income distribution and environmental deterioration utilizing balanced data for 31 Chinese provinces during the period 1996–2015. First, the degree of environmental pollution was calculated by constructing a comprehensive index system, which was formulated using the entropy method, based on six environmental indicators. Then, a spatial panel regression model was also employed in order to estimate whether income inequality is likely to be a relevant factor in environmental deterioration in China. The estimation results showed that: using the index and spatial analysis techniques, significant spatial positive agglomeration were found existing between Chinese provinces in terms of their levels of environmental degradation; the influencing factors estimation results substantiated the existence of an invert U-shaped relation, lending support to the Environmental Kuznets curve theory; more importantly, the study found that income inequality played a significant role in preventing environmental degradation, suggesting that an appropriate level of income inequality over a delimited period is beneficial to improving environmental quality. It should, however, also be emphasized that optimizing the country's income distribution is remains an important long-term task for the Chinese government; other factors were found to exert different types and magnitudes of impacts on environmental pollution. Results showed that many factors—for instance, energy intensity, the share of secondary industry, population density, and foreign direct investment—contribute to environmental deterioration. Conversely, our findings also indicate that rising urbanization levels can have a positive effect on environmental quality. In addition, no clear evidence was found to suggest that local government expenditure is related to environmental degradation.

Convergence in income distributions: Evidence from a panel of countries

There is growing evidence that countries' income distributions have changed significantly since globalization accelerated in the early 1990s. Using a large panel of Gini indices covering 81 countries between 1990 and 2010, we find strong evidence that inequality declined in nations that were initially highly unequal, while inequality increased in nations with initially low inequality. This pattern holds for both developed and developing countries, but developed countries' relative income distributions have converged at a more rapid pace. These findings are robust to the method of estimation, level of economic development, time horizon, data source or measure of inequality. Our results suggest that income distributions in countries are becoming increasingly unequal yet more similar to each other. Consequently, countries are beginning to coordinate their strategies to jointly reduce inequality through initiatives such as the United Nations' Sustainable Development Goals.

Marketing Challenges and Opportunities in Emerging Economies: A Brazilian Perspective

This article describes the challenges and opportunities of marketing in an emerging economy, focusing on Brazil as an exemplar. The main features of the Brazilian economy are discussed with special attention given to the changing nature of the country's income distribution. Where Brazil once had a pyramid‐shaped income distribution typical of many less developed countries, this is rapidly giving way to a diamond‐shaped income distribution due to the emergence of a growing middle class. This, in turn, presents marketers with many opportunities ranging from franchise development to e‐commerce. At the same time, however, marketers are challenged by several features of the Brazilian economy, including poor logistics, corruption, and state interventionism, among other threats. © 2016 Wiley Periodicals, Inc.

Inward and Outward Foreign Direct Investment and Inequality: Evidence from a Group of Middle-Income Countries

Using panel data of a group of 39 middle-income countries over 1981–2006, this paper examines how globalization in general and inward and outward FDI in particular affects inequality. Depending on geographical region and economic system, each component of globalization affects inequality in three groups of countries in different ways: open to inward FDI tends to affect income distribution adversely in transition economies and Latin American countries, but marginally improves income distribution in countries of the reference group. In contrast, open to outward FDI is positively associated with inequality in the reference group whereas negatively associated with that of the other two groups of countries. Crucially, improvement in human capital appears to be the single most reliable way to reduce inequality.

Capital account liberalization and income inequality

This article makes both a theoretical and an empirical contribution to the literature on financial liberalization and income inequality. In the first part, we develop a tractable model that features agents with varying investment abilities and a banking sector. There are two possible interventions to liberalize the banking sector: first, a reduction in reserve requirements, and, second, an increase in the amount of foreign funds that can be used to finance domestic loans. Financial liberalization leads to enhanced banking sector efficiency and adjustments in interest rates affecting income of investors and savers, and, therefore, income inequality. Theoretically, the impact of financial liberalization on income inequality is ambiguous. Yet, the model suggests that financial liberalization will improve income distribution in countries where financial depth is high. Our empirical estimates confirm this conditional effect. More precisely, the estimates suggest that capital account liberalization only tends to lower income inequality if the level of financial depth, as measured by private credit over GDP, exceeds 25 percent.

Financial Development and the "Growth-Inequality-Poverty" Triangle

The main objective of this paper is to study the effects of financial development on poverty reduction taking into account the simultaneous effects on growth and inequality. In order to do so, we decided to make a comparative study between three groups of countries according to the chosen criterion income. We are going to build a model of simultaneous equations over the period of 1990–2010. The results generated by this study have identified that financial development promotes economic growth and reduce poverty in middle- and high-income countries; whereas in low-income countries, financial system does not have a positive effect on these economies. The study showed also that financial development exacerbates inequality of income distribution in countries with low and middle income; whereas for high-income countries, any improvement in the financial system resulted in a decrease in inequality.