Income Distribution Effects Research Articles

Effects of Income Distribution and Fiscal Policy on Growth in Turkey: A Kaleckian Analysis

This study examines the effects of functional income distribution and fiscal policy on growth in Turkey. A post-Kaleckian open economy model is used to analyze the Turkish economy by integrating fiscal policy tools into the econometric model, such as tax burdens on labor and capital and government expenditure for 1988–2017. The novelty of our study is that it considers the private profit motive and rollback of government activities by including public-private partnership investments in the model. Our findings suggest that government ideologies in providing services through different channels do not cause alteration in the domestic demand regime; it stays wage-led in all scenarios we applied. Yet, the overall regime turns out to be profit-led since net export is sensitive to labor costs. JEL Classification: E12, E62, L33

Has the Digital Economy Enhanced the Income Distribution Effect Among Industries? Evidence from China

A powerful correlation exists among the advancement of the economy of digital, sustainable economic advancement, and income distribution. The advancement of the digital economy provides a significant motivating factor for sustainable economic development, while sustainable economic development provides a strong guarantee for income distribution, and the improvement of income distribution is also conducive to sustainable economic development. What is the connection between the digital economy and income distribution? This is the focus of this paper and also an important way to clarify the association between the advancement of the digital economy, sustainable economic development, and income distribution. This paper aims to explore whether the advancement of the digital economy has enhanced the effect of income distribution among industries and examine the role of production efficiency and human capital. Through the use of the multidimensional fixed-effect model, this study finds that the development of the digital economy is favorable to enhancing the income distribution effect among industries, and this income distribution enhancement effect is more prominent in large-scale non-state-owned enterprises. In addition, we also find that digital transformation can dramatically improve the total factor productivity of enterprises, thus enhancing the income distribution impact among industries. The promotion of digital transformation can also improve the quality of human capital in enterprises, strengthen the income distribution impact between industries, and reduce the income disparity among industries. The industry income gap measurement method and the industry perspective of income distribution adopted in this paper contribute to the existing literature and will contribute to the development of income distribution equity in the era of the digital economy and also provide a new vision for sustainable economic development from the perspective of income distribution.

Assessing the economy-wide impacts of digital transformation in the Korean economy: A social accounting matrix multiplier approach

This study assesses the economic impact of digital transformation (DT) in Korea by utilizing a Social Accounting Matrix to explore interconnections across various datasets. Through a social accounting matrix multiplier analysis, this study empirically identifies the production inducement, income inducement, and income distribution effects driven by DT-related infrastructure investments. We analyze how DT influences production, income, and income distribution through infrastructure investments, focusing on its effects on the labor market and household income. The findings indicate that DT accelerates economic growth, favoring digital capital-intensive industries and high-skilled labor, potentially increasing employment polarization and exacerbating income inequality. This study highlights the need for dual approach as to enhance national competitiveness and inclusiveness in an economy driven by DT technologies. This approach involves two key components that work synergistically to maximize the benefits of DT while addressing its potential challenges, suggesting that industrial and innovation policies should be reconstructed to align with the demands of a DT-driven economy.

Traditional output dynamics: A structural perspective

We provide theoretical underpinnings to the traditional IS curve by using the concept of basic and non-basic goods and services in the consumption basket. An extended version of this IS curve incorporates the effects of functional income distribution by appealing to rule-of-thumb behavior. An empirical analysis for both emerging and advanced economies shows that this IS curve does not suffer from the "IS puzzle," a weakness that affects its new Keynesian counterpart, when a measure of the nominal interest rate is used. The interest rate negatively and significantly affects output. Secondly, the second-order term typically specified in the output dynamics does not arise from structural consumption behavior. Thirdly, although we find significant rule-of-thumb behavior in that the labor share is statistically significant, optimal behavior dominates economies. Lastly, basics make up an overwhelming component of the consumption basket, which explains the sluggish response of output to shocks. The implication is that there is a need to extend the basic two-equation model into a 3-equation system by adding the dynamics of the labor share.

The Effect of Income Distribution on Non-Performing Loans in Emerging Market Economies

The main purpose of the study is to analyze the effects of income inequality on non-performing loans by controlling the effects of other macroeconomic variables for 13 emerging market economies in the 2000–2020 period. In this context, the variables of GDP, unemployment, inflation, domestic credit to the private sector, foreign direct investment and current account deficit were also included in the model and the data were tested with the panel ARDL approach. As a result of the analysis, in emerging market countries, it has been observed that there is a positive and significant relationship between non-performing loans and income distribution in the long run. Therefore, it can be interpreted that income inequality has increased the problem of loans. In addition to these results, a positive and significant relationship was found between non-performing loans and growth, domestic loans to the private sector and unemployment, and a negative and significant relationship between inflation, current account balance, and non-performing loans. In this sense, economic growth, domestic loans given to the private sector, and unemployment rates were the factors that increased non-performing loans apart from income distribution. Finally, the effect of the foreign direct investment variable on non-performing loans was not found to be statistically significant. According to the results obtained, it was observed that the coefficient signs of the variables used in the study were compatible with the literature.

Does city smartness improve equality? Research on the impact of smart city construction on income inequality

AbstractSmart city construction is an essential practice in the effort to promote the digital transformation of society as a whole. Taking China's ‘National Smart City’ pilot project as a quasi‐natural experiment, this paper studies the income distribution effect of smart city construction by building a differences‐in‐differences model and using the data of China's prefecture‐level cities from 2008 to 2018. The results show that implementing China's ‘National Smart City’ pilot project has significantly reduced regional income inequality. However, this effect has heterogeneity. In regions with a higher level of economic development, human capital accumulation and R&D investment, the impact of smart city construction on reducing income inequality is stronger. In areas with a higher level of human capital accumulation, smart city construction can reduce income inequality. However, this effect is insignificant in areas with a lower level of human capital accumulation. Mechanisms tests show that smart city construction can reduce regional income inequality by creating more jobs, narrowing the digital divide and improving public service delivery. As stated above, this paper implies that accelerating the construction of smart cities and improving the digital and intelligence levels of the wider society is of great significance to reducing income inequality and building a more reasonable income distribution structure.

Income Distribution Effects of the Belt and Road Initiative

The Belt and Road Initiative (BRI) adheres to the principles of inclusive development, shared business interests, and collaborative construction. This paper empirically investigates the impact of the BRI on domestic income inequality in participating countries using national panel data from 2008 to 2023 and employing a difference-in-differences methodology. The findings indicate that the BRI significantly reduces domestic income inequality in participating countries. This effect is consistent across different geographic locations but is more pronounced in countries with lower levels of economic development. The economic channel analysis reveals that the BRI facilitates trade, which, in turn, reduces income inequality by promoting the industrial upgrading and optimizing the comparative advantages of the host countries. The political channel analysis shows that the BRI enhances governance capacities in participating countries, further contributing to the reduction in income disparity. Extended analyses suggest that the BRI significantly boosts the economic development levels of participating countries, and this positive effect is uniformly distributed across various economies. These findings provide empirical support for the mutually beneficial industrial relationships and inclusive development fostered by the BRI between China and its participating countries.

Universalism versus residualism: a micro-simulation of alternative income maintenance schemes in South Korea

This article examines the past, present and future of income maintenance schemes in Korea. Historically, income security schemes have been built on the idea of work-centred social insurance supplemented by social assistance. This approach was based on the premise of full employment. While current schemes have achieved institutional completeness and have contributed to alleviating poverty and inequality, they have exhibited limitations in responding to the qualitative shifts of capitalism, leading to welfare blind spots. Various alternatives have been proposed, such as universal basic income (UBI), which aims for equality, and residual Safety Income (SI), which aims for efficiency. The objective of this study is to validate the effects of basic income proposals and SI as alternative income maintenance schemes emerging in Korea. We simulated and compared the poverty alleviation and income redistribution effects of the two alternatives using data from the Survey of Household Finances and Living Conditions (2019~2021). The effects of poverty alleviation and income distribution were determined by analysing the hypothetical changes in absolute and relative poverty rates, as well as the Gini coefficient. The efficiency of benefits was assessed as the ratio of the amount used to reduce the poverty gap out of the total benefit amount. The study found that while SI appeared cost-effective in addressing absolute poverty, UBI was also effective in addressing relative poverty and income inequality.

How does circulation industry agglomeration help close the income gap between urban and rural areas? — Evidence from China

The circulation industry is a fundamental and leading enterprise in the national economy that aims to close the income gap between urban and rural areas. We employ the fixed effects model, moderating effects model, threshold effects model, and dynamic spatial Durbin model, using panel data from 30 Chinese provinces (cities) from 2011 to 2021 to investigate the impact of circulation industry agglomeration (Ciia) on the urban-rural income gap (Urgap) at the theoretical and practical levels. The study shows that: (1) Ciia can greatly lower the Urgap, and considerable regional, period, and industry disparities exist. (2) Mechanism tests demonstrate that Ciia can lower the Urgap by addressing resource mismatch and digital economy (Digi) can amplify the inhibitory effect of Ciia on the Urgap. (3) Further study reveals that depending on the degree of Ciia, the impact on the Urgap is characterized by a nonlinear declining marginal effect. Furthermore, there is a geographical time lag in the impact of Ciia on the Urgap, with the short-term effect outweighing the long-term effect. The above findings provide useful suggestions for the Chinese government to narrow the Urgap. Therefore, the government should actively promote Ciia to give full play to its strong income distribution effect and promote the digital development of the circulation industry to narrow the Urgap and help realize common prosperity.

The Impact of Minimum Wage Policies on Income Inequality: Evidence from China

This paper examines the impact of China's minimum wage policy on income inequality. By analysing micro-survey data from China's urban labour market, this study uses microeconometric methods to assess the level and implementation of the minimum wage and its multiple impacts on the employment effect, the labour supply effect, the spillover effect, the inequality effect and the income distribution effect. It was found that the minimum wage policy, while raising the wage level of low-income groups, had a significant negative impact on the income of workers whose income levels fell within the 150 per cent to 250 per cent range of the previous period's minimum wage, suggesting that the minimum wage policy did not have a uniform effect in reducing the income gap.

Combining Computable General Equilibrium Model with Microdata to Assess Poverty and Income Distribution Effects of Cohesion Policy

Combining Computable General Equilibrium Model with Microdata to Assess Poverty and Income Distribution Effects of Cohesion Policy

More green, less labor gains? Green factory and labor income share in China

Green Manufacturing, a pivotal aspect of green transformation, carries high expectations for its potential role in wealth creation and equitable distribution. This paper investigates whether the growth dividend resulting from Green Manufacturing benefits workers. Leveraging the “Green Factory” list released in 2017 and subsequent years as a quasi-natural experiment, we apply a time-varying difference-in-differences methodology to analyze the income distribution effects of Green Manufacturing. Our findings reveal that Green Manufacturing significantly boosts labor productivity within companies but does not notably impact worker wages, leading to a decline in the labor income share. Furthermore, we show that alleviating financing constraints and fostering green innovation are two prominent operating mechanisms, while human capital upgrading shows negligible effects. Overall, the evidence suggests that the growth dividends stemming from Green Manufacturing do not evenly benefit all input factors.

Income distribution and sustainable development nexus: Fostering poverty reduction and integrated sustainability amidst multi-dimensional regional integration

This study investigates the impact of income distribution as poverty reduction on sustainable development (SD), by taking the moderating role multidimensional regional integration (MRII) in fostering the integrated sustainability across 64 Belt and Road Initiative (BRI) countries from 2005 to 2020. Utilising Sys-GMM methodology, the findings support the notion that countries within the BRI are theoretically aligned with a sustainable development path as suggested by economic theory. Moreover, MRII significantly contributes to the integrated sustainability path. The direct channel analysis reveals a negative yet significant effect of income distribution on sustainable development, indicating an increase in disparity and capital management system. Conversely, the indirect channel suggests a reduction in disparity and regionally integrated BRI boost the sustainable poverty reduction. This study identifies positive contributions from macroeconomic conditions, institutional quality, and population size to BRI countries' sustainable development. Additionally, it suggests the inefficient utilisation of resources by BRI countries, particularly in government consumption. The study underscores the need for enhanced regional policies aimed at increasing income and reducing poverty to foster sustainable development. Upcoming research should investigate the unexplored effects of household consumption, financial inclusion, financial aid, and energy poverty influence on integrated sustainability, regarding global financial integration.

The Study on the Income Distribution Effect of Public Education Expenditure

The Study on the Income Distribution Effect of Public Education Expenditure

Relationship Between Human Capital and Income Distribution of a Developing Economy: Empirical Evidence From Ethiopia

Purpose: The purpose of this study is to examine the long-run effect of human capital accumulation on the income distribution of a developing economy such as Ethiopia. Study design: The study is based on time series data covering the period from 1980/1981 to 2019/2020. The autoregressive distributed lag (ARDL) bounds co-integration test and error correction model approach is employed as a method of econometric estimation. Findings: The bounds test revealed a significant and stable long-run equilibrium relationships exist between income inequality (Gini coefficient) and its dynamic regressors of human capital accumulation indicators as well as other explanatory variables. Results of the estimated long-run selected model indicated that secondary and tertiary education attainments as well as total fertility rate have a significant un-equalizing income distribution effect on the country’s economy at the conventional level of significance in the long run. On the contrary, primary education attainment of the labor force has a positive and statistically significant impact on the country’s distribution of income at the standard level of significance. On the contrary, the employment-to-population size ratio has a positive effect, but financial development and institutional and governance quality have an adverse effect on the income distribution of the country in the long run. With respect to the short-run error correction model result, a temporary disequilibrium level of income distribution in the previous period is corrected by approximately 0.9284 in the current period to bring back to a stable long-run equilibrium. Based on these findings, it is important to strengthen and improve the country’s education and health service system for those individuals who are marginalized and deprived from these levels of social services. Originality/value: A few empirical studies on the dynamics between human capital and income distribution have been conducted at cross-country using average years of schooling as a proxy measure of human capital. The novelty of this study is that it examines the relationship between human capital and income distribution at a single country level using the ARDL bounds co-integration and error correction model approach. Furthermore, human capital accumulation is proxied by both education capital (disaggregated by primary, secondary, and tertiary educational attainments) and health capital (life expectancy at birth and total fertility rate) in addition to other relevant explanatory variables for better estimation and policy implications. JEL classification B23, C22, I14, I24, O15

The effect of income distribution on diet‐related environmental footprints: Evidence from urban China

AbstractGiven that income disparity is expanding and diet‐related environmental footprints are increasing in urban China, this study aims to investigate the heterogeneity in these footprints across various income classes and examine the effect of income distribution on the total environmental footprints. Based on the quadratic almost ideal demand system model and taking into consideration the problems of endogeneity of food expenditure and zero expenditure, we estimate the income elasticities for 10 food categories across seven income classes and project the diet‐related environmental footprints under seven scenarios for various strategies of the income distribution. The results show that per capita diet‐related environmental footprints are greater for higher income classes than for lower income classes, as the former consume more animal‐based food. Compared with high‐income classes, income growth favouring low‐income classes results in a rather significant increase in diet‐related environmental footprints. With further economic growth, the lowest income group makes the greatest contribution to the increase in diet‐related environmental footprints. Thus, policymakers should promote a more sustainable diet on the road to alleviating income inequality to ensure sustainable environmental development.

At the territorial roots of global processes: Heterogeneous modes of regional involvement in Global Value Chains

Despite the large evidence of the recent globalization phenomenon at national level, very little is known about the involvement of regional economies in Global Value Chains (GVCs). Instead, the regional dimension of GVCs is of primary importance since regions require an absolute advantage to be part of an international production chain. It can in fact be easily the case that within the same country both the participation and the gains from GVCs strongly differ among regions. In going to the territorial roots of GVCs, the paper aims to conceptualize a taxonomy of different modes in which regions can be involved in GVCs, based on different intensity of participation and rewarding conditions. Based on regional trade in value added matrices, the taxonomy is applied to the manufacturing sector at NUTS2 regions in Europe, combining two indicators of regional participation and ‘terms of trade’ imposed in the chain. Although national patterns are visible, and a clear divide between Eastern and Western Europe emerges, the modes of involvement are highly diversified within countries. Moreover, through a multinomial logit model, the local characteristics associated with the different roles that regions can have within GVCs are looked for. Their identification has far-reaching normative consequences that intervene in the capacity of regions to gain from participation in GVCs, and to mitigate the interregional income distribution effects that this involvement may cause.

Research on the income distribution effect of factor allocation efficiency changes among China's three major industries.

This paper aims to study the impact of correcting the factor misallocation among China's three major industries on China's income gap and income distribution pattern. By using the industry Panel data at the provincial level in China, we measure the degree of factor misallocation among the three major industries in China's provinces from 2002 to 2019 by building a factor misallocation measurement model, and then uses reverse thinking to compare the income gap under the condition of no factor misallocation with the actual income gap, and then obtains the impact of factor misallocation on the income gap, And use this method to focus on analyzing the impact of factor allocation efficiency changes among the three industries on income distribution pattern. The research finds that: (1) There is a serious factor misallocation among the three major industries in each province. From the perspective of subdivided factors, the factor misallocation among the three major industries in China's provinces is mainly caused by labor misallocation. Factor misallocation shows a trend of convergence first and then divergence among regions. (2) There is a strong heterogeneity in the explanatory power of different dimensions of the income gap of factor misallocation among the three major industries in China's provinces. Among them, correcting the misallocation of total factors among the three major industries in China's provinces can only narrow the internal income gap of the tertiary sector of the economy, and expand the internal income gap between the primary and secondary industries. (3) The impact of correcting the total misallocation, capital misallocation and labor misallocation among the three industries on the income gap among industries or provinces is narrowing first and then expanding. (4) Further research shows that although the level of factor misallocation among provinces in China is significantly lower than the average level of factor misallocation among the three major industries within each province, it has a stronger explanatory power for the inter-provincial income gap. Correcting the total factor misallocation and labor misallocation among provinces can significantly reduce the inter-provincial income gap in China. Correcting the total factor misallocation and labor misallocation among provinces in 2019 can reduce the inter-provincial income gap by 51.48% and 81.68% respectively. Only correcting the capital misallocation among provinces will expand the inter-provincial income gap, and only correcting the capital misallocation among provinces in 2019 will expand the inter-provincial income gap by 112.21%.

The impact of digital inclusive finance on farmers' income level: evidence from China's major grain production regions

This paper finds that digital inclusive finance can improve farmers' income level, and has a more significant income increasing effect on low-income farmers. The three sub dimensions of digital inclusive finance have a positive effect on the income level of farmers. The level of regional economic development, farmers' entrepreneurial and employment behavior, and income distribution effect are positively moderating.

Analysis of poverty in eastern Indonesia (Analisis Kemiskinan Di Kawasan Timur Indonesia)

This study was conducted to analyze the effect of economic growth, income distribution, unemployment, education and health on poverty in Eastern Indonesia in 2013-2017. Independent variables used in this study are economic growth, income distribution, unemployment, education and health and poverty as dependent variable. The data used in this study are secondary data sourced from the Central Statistics Agency of Maluku Province consisting of time series data for 2013 - 2017 and cross section data for 12 provinces in Eastern Indonesia. The analytical method used is panel data regression analysis. The results showed that economic growth had a positive and not significant effect on poverty in Eastern Indonesia. Variable income distribution has a positive and not significant effect on poverty in Eastern Indonesia. The unemployment variable has a positive and significant effect on the poverty variable in Eastern Indonesia. Education and health variables have a positive and significant effect on poverty in Eastern Indonesia. The coefficient of determination is 0.993136, meaning that the poverty variable can be explained by variables of economic growth, income distribution, unemployment, education and health by 99.31%. Simultaneous test results (F test), showed variables of economic growth, income distribution, unemployment, education and health simultaneously had a significant effect on poverty in Eastern Indonesia