Impact Income Inequality Research Articles

Promoting Sustainability: Land Transfer and Income Inequality Among Farm Households

The United Nations Sustainable Development Goals emphasize the dangers of inequality and initiatives on how to reduce it. Income inequality is an important part of this and can cause many social problems. This study aims to investigate the impact of land transfer on income inequality of Chinese farm households and its mechanism of action. This study empirically analyzes the impact of land transfer on farm household income inequality based on the OLS model using 27,134 samples from the 2018–2020 China Family Panel Study (CFPS) data. The study finds that land transfer can effectively reduce income inequality among farm households. However, only land transfers out affect income inequality; the effect of land transfers in is not significant. At the same time, there is some heterogeneity in the impact of land transfers on farm household income inequality. The effect is greater in the east and west than in the center. The effect is greater in the north than in the south. The role is greater in food-producing areas than in non-food-producing areas. Mechanism testing shows that land transfer impacts income inequality among farm households by promoting entrepreneurship. Farm households who use the Internet and have stronger social capital gain more from the impact of land transfer on income inequality.

Financial deepening on income inequality: A quantitative meta-analysis study

AbstractThere exists a vast empirical literature on Financial Sector Development (FSD) and the income inequality nexus; however, it lacks consensus. To study this, 24 studies with 87 regression estimates on financial institution depth and income inequality were collected. This paper used the most common method of economic meta-analysis, the Partial Correlation Coefficient (PCC), to answer the question: What is the magnitude and impact, if any, of financial institution depth on income inequality? In addition, a multivariate meta-regression model was used to find moderator variables that produced mixed results in the literature. The results show that the global average comovement of financial institution depth (domestic credit) on income inequality is very small but positive; suggesting that growth in domestic credit may widen income inequality. The positive correlation between domestic credit and income inequality highlights how financial institutions use household income and collateral as a signal when deciding on credit applications. Finally, the multivariate regression results suggest that the present heterogeneity within the literature stems from different methodologies and control variables included in the econometric models, and panel studies that mix countries with heterogeneous characteristics. These suggest that different components of FSD may impact income inequality differently.

Subsidy-Dominated Non-Farm Income Improves Herder Household Livelihoods and Promotes Income Equality in North Tibet, China

The non-farm sector is critical in supporting sustainable economies, alleviating poverty, and improving human well-being. However, the drivers of non-farm income and how it impacts income inequality remain underexplored, especially in alpine regions worldwide. Herein, we conducted face-to-face interviews using semi-structured questionnaires with 665 herder households across 54 villages in North Tibet from 2018 to 2020. We assessed the role of non-farm income in household economies and explored the determinants of household income using basic statistical methods, Gini coefficient analysis, and mixed-effects modeling. Our results showed that non-farm income accounted for approximately 80% of the total household income. It contributed to lower income inequality in rural North Tibet, with government subsidies playing a more vital role than wages and business income in this reduction. Results indicated that the number of migrant workers was the most significant positive predictor of both non-farm income and total household income, whereas livestock units dominated farm income. Given the modest contributions of livestock-derived income (~5%) and wage and business revenues (~18%) to overall earnings, this study suggests that policies should primarily focus on strengthening rural livestock husbandry. Simultaneously, it is imperative to foster environments that encourage entrepreneurship and non-farm activities and to expand access to skill-based training. Such initiatives and measures are essential for diversifying livelihood strategies and improving resident welfare in North Tibet.

Fintech dividend: How would digital financial services impact income inequality across countries?

Discrimination and marginalization in the financial services provided by traditional intermediaries are often cited as one of the main causes of persistent income inequality across socioeconomic groups in many countries. Whether Fintech eliminates such prejudice and exclusion and promotes equitable income distribution is unclear. This paper examines the impact of Fintech digital financial services on income inequality. Using a two-step generalized methods-of-moments (GMM) estimator, we analyze unbalanced panel data from 65 countries spanning the years 2013–2019. Drawing on the most recent data available on the actual transaction volume of Fintech digital financial services, we generate evidence at the level of specific service segments. We find that Fintech digital lending and digital capital-raising services are significantly and negatively associated with income inequality. Furthermore, our results from mechanism analysis suggest that Fintech mainly impacts income inequality by improving the accessibility and efficiency of financial services. Overall, our findings imply that promoting Fintech is critical to improving financial inclusion and alleviating income disparity.

Effects of digital innovation on income inequality among different workforces: evidence from Chinese industries

ABSTRACT To understand the impact of digital innovation on the workforce and its role in achieving common prosperity, this paper uses data from Chinese A-share listed companies during 2006–2021 to investigate the effects of digital innovation on income inequality among different industry-level groups. We find that digital innovation significantly reduces income inequality among employees across industries, but it does not significantly impact income inequality within management groups. Through mechanistic analysis, we find that digital innovation decreases income inequality among ordinary employees whose incomes are closely linked to company performance and thereby for the entire workforce by narrowing the income gap across industries. However, as digital innovation does not significantly influence evaluation systems (e.g. educational degrees) for management income, it does not contribute to reducing income inequality among managerial levels. These findings provide valuable insights to develop policies for common prosperity.

The Fabric of Transition: Unraveling the Weave of Labor Dynamics, Economic Structures, and Innovation on Income Disparities in Central and Eastern Europe Nations

In recent years, the issue of income inequality has ascended to the forefront of national and international agendas, underscored by the urgency to navigate the complexities of market-driven economies without exacerbating social disparities. These challenges are particularly pronounced in the post-communist nations of Central and Eastern Europe, where the transition legacy and the marketization forces present unique dynamics in the evolution of income disparities. This research investigates the intricate mechanisms through which marketization impacts income inequality within the Central and Eastern European countries context, aiming to uncover how economic transformations influenced by global sustainability goals can contribute to narrowing the income gap. By employing panel data estimation techniques and Generalized Method of Moments (GMM) analysis, this study highlights the enduring nature of income disparities and the critical roles played by economic growth, education investment, labor market reforms, globalization, and governance quality in shaping equitable income distributions. Findings reveal that, despite the competitive nature of market economies potentially creating disparities, strategic policy interventions in education, economic policy, and labor market regulations can mitigate the adverse effects of marketization on income inequality. Additionally, this research emphasizes the importance of strong institutional frameworks and the nuanced role of the informal economy in influencing income distribution dynamics.

Exploring the Fiscal policy—income inequality relationship with Bayesian model averaging analysis

The authors have employed several techniques to account for model uncertainty in the inequality-growth model. However, the BMA technique is the most prominent approach that solves model uncertainty in the inequality-growth literature. This study applied a recent BMA analysis using panel data to examine the role of fiscal policy on income inequality in 37 OECD countries from 2000 to 2015. Fiscal policy (in terms of tax revenue increase) serves as a redistributive tool or instrument to transfer income from higher income earners to lower earners and is considered a mechanism for income equality. To the best of the author’s knowledge, only a few empirical growth studies have considered fiscal policy impact in their income inequality model setup. Our work contributes to very little research on the fiscal policy–income nexus using a novel BMA and MCMC regression as a robust methodology. Our empirical evidence on the role of fiscal policy on income inequality has found three variables, namely, economic growth, fiscal policy, and urban population, to impact income inequality significantly. We also found that the countries are conditionally neither converging nor diverging because of the probability of their coefficient being high at 100%. As expected, the coefficient of fiscal policy has a significant negative relationship with income inequality, indicating that fiscal policy reduces income inequality significantly by an average of 22% (with 100% certainty) for both BMA and Bayes models in OECD countries.

An empirical analysis of inflation's influence on income inequality in Lithuania

Income inequality is a growing problem worldwide, especially in developed countries, with adverse social, economic, political and health consequences. In 2017, the goal of reducing poverty and inequality was included in the United Nations' seventeen Sustainable Development Goals list. Despite this, governments are not paying enough attention to tackling the problem, and inequality continues to rise. To take appropriate measures to reduce income inequality, it is essential first to understand the underlying causes, as this can help to tackle the problem at its root. Many different factors have been identified as impacting income inequality, one of which is inflation. Inflation is currently at an all-time high in the country, reaching as high as 19.7% in 2022. This makes it particularly difficult for low-income earners to make ends meet, as buying necessities is becoming harder and harder. Given that rising inflation, due to geopolitical factors, is also an issue in Lithuania and throughout Europe, it is essential to analyse the relationship between income inequality, as this can help us make the right decisions in tackling both problems. This study aims to identify the impact of inflation on income inequality in Lithuania. The research methods used to achieve the objective were graphical analysis, literature analysis, correlation analysis and regression analysis. The study shows a linear relationship between the Gini coefficient and inflation, as measured by the change in the GDP deflator, in Lithuania over 2008-2021, but that the impact of inflation on inequality is observed after one year. Similarly, a parabolic relationship is found when examining the impact of a change in inflation, as measured by the change in the GICP, on income inequality. However, changes in producer prices significantly impact income inequality only after three years. An analysis of the impact of changes in the prices of different commodities on income inequality reveals that, over the period analysed, the main contributors to inequality have been increases in the prices of oil, gas, food, and non-alcoholic beverages. Inflation directly impacts income inequality in Lithuania, so policymakers should consider it when formulating social policy.

Does monetary policy impact income inequality?

PurposeThis article analyzes the impact of monetary policy on income inequality across 16 advanced economies. The author investigates three key points: (1) the relationship between domestic monetary policy and domestic income inequality, (2) the spillover effect of USA monetary policy (including quantitative easing) on international inequality and (3) the quantitative influence of the monetary policies of both the USA and the Eurozone on the formation of domestic income inequalities.Design/methodology/approachThe author employed the Global Vector Autoregressive (GVAR) model, which uses Vector Autoregressive with Exogenous Variables (VARXs) models of each economy to build an integrated system that enables us to evaluate individual responses to global shocks.FindingsThe author's analysis reveals that (1) contractionary monetary policy exacerbates domestic inequality and (2) USA monetary policy, including quantitative easing, affects international inequality. Furthermore, the author's variance decomposition analysis highlights that USA monetary policy is especially influential on income inequality in Norway and Sweden. Additionally, the cointegrating analysis confirms that monetary policy's impact on inequality persists in the long term.Originality/valueMost of the studies focused on investigating domestic economies as closed economies. However, the author's approach differs in that the author uses the GVAR, which treats all economies as open. This allows us to incorporate the world economy into the domestic dynamics and connect the economies using bilateral trade. Another advantage of the GVAR is that it captures spillover effects by modeling each economy and constructing the international economy.

Financial inclusion and income inequality in developing countries: The role of aging populations

This paper investigates how financial inclusion impacts income inequality by considering the role of an aging population as a moderator in 73 developing countries from 2004 to 2019. The generalized method of moments (GMM) estimator results reveal that financial inclusion and an aging population are insignificant determinants of income inequality. Nevertheless, the interaction effect between both variables on income inequality is substantial in these countries. Meanwhile, the empirical findings of a panel quantile regression indicate that financial inclusion and an aging population are significant determinants of reducing income inequality at low quantile levels. The aging population is essential in moderating the relationship between financial inclusion and income inequality, especially in increasing the income gap when countries’ inequality is lower; however, the coefficient values showed a downward-sloping trend toward high quantiles.

The impact of foreign direct investment on income inequality in developing countries: The Bayesian approach

Inequality in general and income inequality in particular have existed for a long time and tend to increase daily. Foreign direct investment (FDI) is expected to be an important factor contributing to mitigating that situation. However, the results of previous empirical studies on the impact of FDI on income inequality have not reached a consistent conclusion. Therefore, this study evaluated the impact of foreign direct investment on income inequality in developing economies. The study has provided evidence that the relationship is nonlinear through data from a sample of 36 developing countries between 2008 and 2020 and the Monte-Carlo algorithm according to the Bayesian approach. We document a U-shaped effect of FDI on income inequality. Besides, other factors, including trade openness and migration, obviously impact income inequality. Different results were found when FDI interacted with trade or migration, representing important channels through which inequality is affected. With these results, we suggest that policymakers in developing countries should develop appropriate policies on FDI attraction encourage trade openness and migration to reduce income inequality.

Exploring the heterogeneous impact of technological innovation on income inequality: Formulating the SDG policies for the BRICS-T economies

The present research evaluates the effect of technological innovation distribution on the distribution of income using data from between 1992Q1 and 2019Q4 for the BRICS-T (Brazil, Russia, India, China, South Africa, and Turkey) nations. The BRICS-T nations present a good case for this research since this problem could be more widespread in developing countries with high prospects for economic growth. The quantile causality and quantile-on-quantile regression techniques have been used to evaluate this association. The research findings provide a range of outcomes from different countries, which can be grouped into three categories; (i) Technological innovation impacts income inequality positively. (ii) Technological innovation distribution impacts income inequality distribution negatively. (iii) The effects of technology innovation on income distribution are not evenly distributed. Significant policy ramifications are deduced that might inspire sustainable development plans in the BRICS-T nations. This research is one of the first studies to demonstrate a direct connection between income inequality and technological innovation across various quantiles within a country. The study also effectively shows how these techniques are utilized to deduce the policy ramifications of the Sustainable Development Goals (SDGs).

Trade Openess, FDI and Income Inequality: New Empirical Evidence from Nigeria

A huge number of empirical literature has carried investigation on trade openness-income inequality nexus globally. However, there are areas of knowledge gap on the part of the impacts of FDI inflows on inequality to the Nigerian economy. As a result of this knowledge gap and growing concern for variations in methodologies and scope which makes the debate on nexus between trade openness, FDI and income inequality not beyond controversy. Hence, this study examines the nexus between trade openness, FDI and income inequality in Nigeria between 1981 and 2019 using ARDL methodology. Our findings show that shows that trade openness exerts a negative effect on income inequality in the short-run. This implies that rising trade openness leads to decline in inequality. Equally, the study finds that FDI is negatively related to income inequality. The findings are in tandem the theoretical prediction of Stolper-Samuelson‘s theorem in case of Asia that trade openness and FDI inflow impact income inequality. The findings on government expenditure also exerts a positive effect on inequality. Given that proxies for institutional and macroeconomic determinants demonstrate a diverse variety of indications and effects, this study suggests a policy stimulus aimed at enhancing economic and social structures while also stimulating FDI influx potential in order to raise household incomes.

Health improvements impact income inequality

This paper investigates whether and to what extent long-run trends in population health affected income inequality in the United States over the period 1960–2000. To isolate exogenous variation in health over time, the analysis exploits the sharp decline in cardiovascular disease mortality across states that originated from medical advances in the treatment and prevention of these diseases after 1960. The results demonstrate that health improvements contributed to rising income inequality through mechanisms related to education.

REGIONAL ANALYSIS OF THE PACIFIC ALLIANCE COUNTRIES ON THE RELATIONSHIP BETWEEN INCOME INEQUALITY AND SOCIAL CAPITAL

Social capital is considered a productive resource for societies. The increase in social trust is usually related to both economic growth and a reduction in inequality. In Latin American countries, and particularly the economies that belong to the Pacific Alliance, the relationship between social capital and income inequalities has not been studied at regional level. The paper aims to analyze whether social capital impacts income inequality in the case of the Pacific Alliance regions. Dynamic panel data models were used, covering 72 regions during the period 2002-2011. The results show that the decline in generalized trust and congress trust impacts negatively income inequality, while government trust, police trust and company trust have not effect.

Law in the tax legal system, income inequality and economic growth: An empirical estimation

The law on the tax system is of great interest when we discuss income inequality and economic growth. The understanding and interpretation of the purpose of taxes are closely related to the rule of the role of the state as the expansion of the role of the state increases the need for monetary means by which the state meets public needs and which in itself constitute public revenues (Bardho, 2022). This study aims to highlight the impact of income inequality and economic growth in the case of North Macedonia. The distribution of income and the average level of income in a developing country is the key factor for social wellbeing. Countries, where income inequality is decreasing, grow faster than those with rising inequality (OECD, 2014). The data used are time series data and cover the period 1997–2019. This study uses data from World Development Indicators (WDI) and sheds light on the factors, which impact income inequality using multiple regression analyses. This study employs the OLS regression analysis in order to estimate the variables that affect income inequality and economic growth. It is concluded that the positive Gini coefficient approves the Kuznets hypothesis and the pro-inequality theory which means that in the first phase of countries’ development, income inequality is expected to be positively linked to economic growth. The study suggests that economic growth, if the benefits of growth are evenly distributed, has a positive effect on reducing income inequality

The Role of Financial Development in the Relationship Between Income Inequality and Economic Growth: Evidence from Method of Moments Quantile Regression

This study sheds light on the linear and nonlinear relationship between financial development level and income inequality across 79 countries within a period of 1995 to 2016. To test this relationship panel the Method of Moments Quantile Regression (MMQR), which was recently published by Machado and Silva (2019), has been employed. Besides Pedroni and GUV cointegration tests, FMOLS and DOLS have been administered. Although traditional mean estimators can explain the heterogonous nature of analysed countries, since their results depend on conditional mean they fall short in making the responses heterogonous. In that sense, the effects of specific factors such as financial and economic developments which also impact income inequality have been inspected via MMQR, which also takes into account certain econometric difficulties such as heterogeneity and endogeneity in various quantiles. Compared to other methods, another advantage of MMQR is that by providing information on how explanatory variables can influence the entire conditional distribution, it allows the use of methods only valid in the estimation of conditional means, such as difficulty in noticing heterogeneity and endogeneity problems in panel data models. According to the results obtained from the MMQR model, Greenwood and Jovanovic’s (1990) inverted U hypothesis was accepted only in countries with an inequality income distribution between financial development and income inequality, whereas in counties with equal income distribution the income inequality widening hypothesis was confirmed. According to Panel FMOLS and Panel DOLS and also coefficient estimations, Greenwood and Jovanovic (1990)’s inverted U hypothesis was confirmed in the relationship between financial development and income.

Inequality, policy polarization and the income gap in turnout

Previous research into the relationship between income inequality and turnout inequality has produced mixed results, as consensus is lacking whether inequality reduces turnout for all income groups, low-income earners, or no one. Therefore, this paper builds on this literature by introducing supply-side logic, through the first individual-level test of the impact that income inequality (moderated by policy manifesto positions) has on turnout. It does so through multilevel logistic regressions utilizing mixed effects, on a sample of 30 advanced democracies in 102 elections from 1996 to 2016. It finds that higher levels of income inequality significantly reduce turnout and widen the turnout gap between rich and poor. However, it also finds that when party systems are more polarized, low-income earners are mobilized the greatest extent coupled with higher inequality, resulting in a significantly reduced income gap in turnout. The findings magnify the negative impacts income inequality can exert on political behavior and contribute to the study of policy offerings as a key moderating mechanism in the relationship.

Sustainable Utilization of Financial and Institutional Resources in Reducing Income Inequality and Poverty

This study aims to determine the role of globalization, electronic government, financial development, concerning the moderation of institutional quality in reducing income inequality and poverty in One Belt One Road countries. The electronic government and regional integration of the economies of the One Belt One Road countries has increased globalization and can play a vital role in reducing income inequality and poverty. However, this globalization and digital transformation of government systems can only be beneficial in the presence of good institutional quality. The sample includes 64 One Belt One Road countries from 2003 to 2018. We employed a two-step system generalized method of moment (Sys-GMM) and a robustness check through Driscoll–Kraay standard errors regression. Our findings show that globalization, economic growth, e-government development, government expenditure, and inflation have a statistically significant and negative impact on income inequality and are key to eradicating income inequality and poverty. On the other hand, financial development, gross capital formation, and population size positively influence income inequality, which causes an increase in poverty and income inequality as financial development and population levels increase. Moderating variable institutional quality also positively impacts income inequality, which means that institutional quality in Belt and Road Countries is weak, as they are mostly developing countries that need to improve their systems. Moreover, the marginal effect also revealed that institutional quality has a corrective effect on the factors’ relationship with income inequality. Our findings endorse and conclude that globalization and e-government development improve economic growth and eradicate poverty and income inequality by boosting digitalization, investments, job creation, and wage increases for semi-skilled and unskilled human capital in Belt and Road countries. The sustainable utilization of financial and institutional resources plays a vital role in reducing income inequality and poverty in Belt and Road countries.

The Causal Effect of Income Inequality on Attribution and Social Trust

Across the social sciences researchers have debated the impact income inequality has on people's perceptions, specifically on attribution and social trust. Causal identification of such effects, however, has been difficult for a variety of reasons. In this paper we use a combination of surveys and behavioral lab experiments to identify a causal impact of inequality on attribution and social trust. Using positional primes we find that higher relative position has a positive impact on belief in meritocracy and social trust, which we causally identify both using a novel incentivized lab task as well as standard survey measures. These results are in line with correlational associations we find using larger general surveys. They speak to why inequality can be so socially and economically corrosive while at the same time remaining largely unaddressed.