Greater Income Inequality Research Articles

Income Inequality and Social Preferences for Redistribution and Compensation Differentials

In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe). If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change. Exploring movements around these long-term levels, however, this study finds mixed evidence regarding the vicious cycle hypothesis. On one hand, larger compensation differentials are accepted as inequality grows. This growth in differentials is of a smaller magnitude than the actual increase in inequality, but it is nonetheless positive and substantial in size. Weighing against this, growth in inequality is met with greater support for government-led redistribution to the poor. These patterns suggest that short-run inequality shocks can be reinforced in the labor market but do not result in weaker political preferences for redistribution.

Financialization and Income Inequality in the United States, 1967–2010

AbstractThis article presents a historical overview of the late 20th‐century advent of financialization, that is, the unprecedented growth of the financial sector. We summarize its origins and consequences, particularly greater income inequality. An econometric model quantifies the relationship. We conclude that along with higher unemployment and an eroding minimum wage, the growth of the U.S. financial sector has contributed to the exacerbation of inequality in recent decades.

The Role of Social Determinants in Tackling Health Objectives in a Context of Economic Crisis

The impact of the economic crisis on health through its social determinants has the greatest effect on disadvantaged, low income households as they are more vulnerable to falls in income and are more likely to suffer the employment effects of an economic crisis. They are subject to exclusionary processes that lead to worse health both in the short and long term. The health impacts of an economic crisis include an increase in suicides, homicides and cardiovascular mortality, a fall in road traffic accidents, and worse infectious disease and mental health outcomes. Those who become unemployed have a greater risk of poor health than the employed, while employees may be affected by the rise in insecure and temporary work and a greater effort-reward imbalance. As the cost of living rises faster than incomes, more households fall below a minimum income necessary to live a healthy life. There are higher levels of poverty, greater income inequalities and more households with debt problems or other financial difficulties. Lower incomes lead to more homelessness and fuel poverty. All of these factors are associated with worse physical and mental health. Health inequalities are likely to widen following an economic crisis, though policy responses can help to mitigate the impacts. Higher levels of social spending are associated with better health outcomes and reduced inequalities, whereas research suggests that austerity measures do not have positive health effects. Health equity impact assessments should be carried out on all policies. Specific policy areas covered in the recommendations include universal health coverage, active labour market programmes, a fairer tax system, homelessness prevention, housebuilding, debt relief and fuel poverty measures. Local interventions can also do much to improve daily living conditions, through improving public services and resilience to financial and other shocks.

The Relationship Between Economic Freedom And Income Equality In The United States

While considerable research in the past has focused on the socioeconomic impact of economic freedom on economic growth among nations, less emphasis has been devoted to the relationship between economic sovereignty and income equality. This is particularly true when the area of focus has been restricted to comparisons among states within the United States. Furthermore, what work has been offered comparing US states has proven to be contradictory. Certain studies reviewed in this paper suggest that higher measures of economic freedom are associated with greater income inequality. On the other hand, evidence exists that less inequality is found in areas with greater economic autonomy. This study uses the Gini Index as measures of income distribution. The Fraser Institute in Vancouver, Canada offers well-respected measures of economic freedom among the US states and the provinces of Canada. These data are used to further examine relationships between state levels of economic freedom and income distribution with the intent to offer some general consensus regarding this all-important association.

Political Parties and Representation of the Poor in the American States

Motivated by recent work suggesting that low‐income citizens are virtually ignored in the American policymaking process, this article asks whether a similar bias shapes the policy positions adopted by political parties much earlier in the policymaking process. While the normative hope is that parties serve as linkage institutions enhancing representation of those with fewer resources to organize, the resource‐dependent campaign environment in which parties operate provides incentives to appeal to citizens with the greatest resources. Using newly developed measures of state party positions, we examine whether low‐income preferences get incorporated in parties’ campaign appeals at this early stage in the policymaking process—finding little evidence that they do. This differential responsiveness was most pronounced for Democratic parties in states with greater income inequality; it was least evident for Republicans’ social policy platforms. We discuss the implications of these findings for representation in this era of growing economic inequality.

Belonging, Status, or Self-Protection? Examining Justice Motives in a Three-Level Cultural Meta-Analysis of Organizational Justice Effects

The current meta-analysis examines cross-national differences in justice-work attitude and behavior associations to identify underlying justice motives, that is, when and why people pay attention to justice. A three-level meta-analysis with 54,100 participants from 36 countries was conducted. Income inequality and cultural values were used as moderators after statistically controlling for unreliability of measures. Systematic cross-national differences in justice effects were found. Associations of justice with other work variables are stronger if there is greater income inequality, people expect their leaders and institutions to foster commitment and loyalty (institutional collectivism) and individuals identify with their close in-groups (in-group collectivism). This suggests that belongingness (collectivism) and control (income inequality) motives are important. Implications for justice theories and cross-cultural research are discussed.

Changes in income inequality and the health of immigrants

Research suggests that income inequality is inversely associated with health. This association has been documented in studies that utilize variation in income inequality across countries or across time from a single country. The primary criticism of these approaches is their inability to account for potential confounders that are associated with income inequality. This paper uses variation in individual experiences of income inequality among immigrants within the United States (U.S.) to evaluate whether individuals who moved from countries with greater income inequality than the U.S. have better health than those who migrated from countries with less income in equality than the U.S. Utilizing individual-level (March Current Population Survey) and country-level data (the United Nations Human Development Reports), we show that among immigrants who have resided in the U.S. between 6 and 20 years, self-reported health is more favorable for the immigrants in the former category (i.e., greater income inequality) than those in the latter (i.e., lower income inequality). Results also show that self-reported health is better among immigrants from more developed countries and those who have more years of education, are male, and are married.

Religion, income inequality, and the size of the government

Recent empirical research has demonstrated that countries with higher levels of religiosity are characterized by greater income inequality. We argue that this is due to the lower level of government services demanded in more religious countries. Religion motivates individuals to engage in charitable giving and this leads them to prefer making their contributions privately and voluntarily rather than through the state. To the extent that citizen preferences are reflected in policy outcomes, religiosity results in lower levels of taxes and hence lower levels of spending on both public goods and redistribution. Since measures of income typically do not fully take into account private transfers received, this increases measured income inequality. We formalize these ideas in a general equilibrium political economy model and also show that the implications of our model are supported by cross-country data.

OP03 Spatial Segregation and Socioeconomic Inequalities in Health in Brazilian Cities: Combining Spatial and Social Epidemiology

BackgroundSpatial and socioeconomic inequalities in health are well-documented across the world, with poorer people, areas and regions experiencing poorer health and higher mortality risks than richer people, areas and regions....

Beyond Work Ethic: Religion, Individual, and Political Preferences

We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure, and for redistribution and intervention in the economy. We use a Fuzzy Spatial Regression Discontinuity Design to exploit a historical quasi-experiment in Western Switzerland, where in the sixteenth century a hitherto homogeneous region was split and one part assigned to adopt Protestantism. We find that Reformed Protestantism reduces referenda voting for more leisure by 14, redistribution by 5, and government intervention by 7 percentage points. These preferences translate into higher per capita income as well as greater income inequality. (JEL D12, D31, D72, H23, N33, Z12)

No taxation, no democracy? Taxation, income inequality, and democracy

Does taxation promote democracy? Revisiting this question, I hypothesize that the effects of taxation on democracy tend to be relatively stronger in unequal societies because higher income inequality can amplify the extent to which citizens dissatisfied with higher levels of taxation want to soak elites. Using event history models to analyze a pooled time-series dataset of regime transitions that cover all countries from 1970 to 2000 if data are applicable, I find empirical evidence that taxation has a conditional impact on democratization, but not on democratic breakdown. According to the theory, higher taxation levels and greater income inequality should tend to promote democracy.

The measurement of inequality in Fiji's household income distribution

PurposeMeasures of inequality determine the effectiveness of social and economic policies aimed at reducing inequality and to design effective intervention policies. The purpose of this paper is to focus on poverty reduction and welfare improving impacts of reducing income inequality in the case of Fiji. Using Fiji's Household Income and Expenditure Survey 2002‐2003, a comprehensive analysis is used to measure the level of inequality by household income, quintile income distribution, decomposition of inequality by ethnicity and regional groups, and the household income inequality by source of income.Design/methodology/approachSeveral statistical techniques have been applied to investigate the degree of inequality in the household income. These include the Gini coefficient, the Nelson ratio, the concentration index and the Atkinson index. An evaluation by ethnicity, regions and household income sources reflects the level of inequality, and concerns for policies and governance.FindingsThe results show that urban households, in particular, experience greater inequalities, in both positive and normative terms. The Indo‐Fijian households experience greater income inequalities than the Fijian households. Decomposition results for the separate factor income components also indicate major sources of inequality. These findings clearly establish that Fiji still has a long way to go in reducing the income gaps between the rich and the poor in both rural and urban households.Originality/valueThe paper is a first study that estimates various measures of inequality in the case of Fiji. The implication of the empirical findings suggests that Fiji is unlikely to achieve its Millennium Development Goal of halving poverty rate by 2015 due to the large income differentials by ethnicity and in the urban‐rural areas.

Does inequality in China affect health differently in high- versus low-income households?

China's so-called ‘reform and opening up’ policy (Gai Ge Kai Fang), implemented nearly 30 years ago, has led to tremendous economic development. China's nominal Gross Domestic Product (GDP) was 3.25 trillion US dollars in 2007, making it the fourth largest economy in the world. At the same time, income inequality has become quite skewed in China, inviting considerable criticism. Moreover, the trend towards greater income inequality persists. Of particular public policy relevance is the effect of income inequality on health disparities in China, particularly for low-income households. This study addresses this issue using a longitudinal dataset from the China Health and Nutrition Survey (CHNS) over the period 1997 to 2006. Our central finding is that income inequality affects health differently by socioeconomic status: income inequality harms individual health among low income households by more than it does among high income households. More specifically, health is more adversely affected by greater income inequality for households with low incomes. China's central government is committed to making further investments in the health care system. As part of that effort, attention should be directed at low income households to reduce health inequality, possibly providing them with a health insurance safety net similar to Medicaid in USA.

Has Income Inequality or Media Fragmentation Increased Political Polarization?

The increasing polarization of Congressional voting patterns has been attributed to factors including generational shifts, economic conditions, increased media fragmentation, and greater income inequality. The first of these factors is difficult to test with time series data owing to the low frequency of generational shifts, while the tendency of business cycles to reverse suggests that economic cycles are unable to account for long-term shifts in polarization. This leaves two main possible long-run drivers: the increasingly fragmented state of American media as stressed by Prior (2005, 2007) and Duca and Saving (2012a), and increased income inequality, as emphasized by McCarty, Poole, and Rosenthal (2006, forthcoming) and Stiglitz (2012). ; Using statistical techniques suitable for analyzing variables with shifting long-run averages we find evidence indicating that media fragmentation has played a more important role than inequality, at least as tracked by available data and measures. Periods when the share of Americans with access to cable or satellite TV has risen are followed by upward shifts in polarization. Furthermore, our results suggest that the polarization arising from media fragmentation or inequality may make it more difficult to achieve the political consensus needed to address major challenges, such as the long-run fiscal imbalances facing the United States.

Beyond Work Ethic: Religion, Individual and Political Preferences

We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure, and for redistribution and intervention in the economy. We use a Fuzzy Spatial Regression Discontinuity Design to exploit a historical quasi-experiment in Western Switzerland, where in the 16th century a hitherto homogeneous region was split and one part assigned to adopt Protestantism. We find that Reformed Protestantism reduces referenda voting for more leisure by 12, for redistribution by 7, and for government intervention by 6 percentage points. These preferences translate into higher per capita income as well as greater income inequality.

On Compulsory Voting and Income Inequality in a Cross-Section of Countries

This paper explores the link between compulsory voting and income distribution using a cross-section of countries around the world. Our empirical cross-country analysis for 91 countries during the period 1960-2000 shows that compulsory voting, when enforced strictly, improves income distribution, as measured by the Gini coefficient and the bottom income quintiles of the population. Our findings are robust to changes and additions to our benchmark specification. Since poorer countries suffer from relatively greater income inequality, it might make sense to promote such voting schemes in developing regions such as Latin America. This proposal assumes that bureaucratic costs related with design and implementation are not excessive.

EMERGENCE AND PERSISTENCE OF INEFFICIENT STATES

We present a theory of the emergence and persistence of inefficient states based on patronage politics. The society consists of rich and poor. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. By choosing an inefficient state structure, the rich may be able to use patronage and capture democratic politics, so reducing the amount of redistribution in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient one. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We obtain that the rich‐bureaucrats coalition may also expand the size of bureaucracy excessively so as to generate enough political support. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater income inequality, when bureaucratic rents take intermediate values, and when individuals are sufficiently forward-looking. (JEL: P16, H11, H26, H41)

Consequences of social inequality for democracy in Western Europe

Research on social inequality speaks of a major change in income inequality that has been taking place since the 1970s. At first, inequality in income distribution mainly occurred in Anglo-Saxon countries, but it has also been on the rise in Western Europe over the last decades. In light of this trend, we ask how inequality affects political participation and attitudes towards democracy. In our article, we first consider the increasing income inequality in OECD countries. We then analyze data from 17 Western European democracies from the European Social Survey. The analysis shows that an increase in unconventional forms of participation inhibits the ideal of political equality as these are more heavily biased towards the well-to-do than conventional forms of participation, particularly the act of voting. Third, we run a multilevel regression with survey data and a number of country-level variables to show that people are not only less satisfied with the way democracy works in countries with greater income inequality, but the citizens of these countries also trust politicians and parliaments less.

AGGREGATE AND DISTRIBUTIONAL EFFECTS OF TAX POLICY WITH INTERDEPENDENT PREFERENCES: THE ROLE OF “CATCHING UP WITH THE JONESES”

This paper analyzes the aggregate growth and distributional effects of tax policy using an endogenous growth model with heterogeneous agents having “catching up with the Joneses” (CUJ) types of preferences. We characterize the aggregate equilibrium of this economy, as well as its distributional properties, and show that the consumption externality present with CUJ preferences produces greater income inequality than is obtained with conventional time-separable preferences. The consumption externality substantially alters the effects of tax policy, mostly quantitatively, but in some cases qualitatively as well. Extensive numerical simulations are conducted and used to compare the consequences of different modes of taxation, highlighting the tradeoffs involved.

Religion, Income Inequality, and the Size of the Government

Recent empirical research has demonstrated that countries with higher levels of religiosity are characterized by greater income inequality. We argue that this is due to the lower level of government services demanded in more religious countries. Religion requires that individuals make financial sacrifices and this leads the religious to prefer making their contributions voluntarily rather than through mandatory means. To the extent that citizen preferences are reflected in policy outcomes, religiosity results in lower taxes, which in turn implies lower levels of spending on both public goods and redistribution. Since measures of income typically do not fully take into account the part of income coming from donations received, this increases measured income inequality. We formalize these ideas in a general equilibrium political economy model and also show that the implications of our model are supported by cross-country data.