Increase In Income Inequality Research Articles

Relationship between income inequality, social transfers, poverty, and employment in Ukraine

The impact of social transfers on income inequality and poverty remains a subject of debate, particularly regarding threshold effects, design, and integration with taxation and labor market dynamics. Using a linear regression model, the study analyzes the dependency of the Gini index on the percentage of social transfers in the average household’s monthly resources, the percentage of households with income below the median, and the percentage of the employed populace in Ukraine from 2010 to 2021. The results show that a 1% increase in social transfers in household income reduces income inequality by 0.13%, a 1% increase in employment decreases income inequality by 0.1%, whereas a 1% rise in poverty leads to a 0.34% increase in income inequality. In line with the results from EU and OECD countries, this study confirms that increasing the share of social transfers in household incomes contributes to the mitigation of income inequality in Ukraine. However, this remains valid only if the share of social transfers in households’ total income rises proportionally. The income and expenditure patterns of Ukrainian households, along with the Gini index, reflect poverty, which is partially mitigated by social transfers; however, their effectiveness is constrained by offsetting inflation. The rise in household incomes without a corresponding reduction in poverty suggests that employment is no longer the predominant factor in poverty alleviation in Ukraine. Acknowledgment This paper is funded as part of the project “Financial tools for reducing economic inequality in Ukraine” research project (No. 0124U002254), conducted at the State Organization “Institute for Economics and Forecasting of the National Academy of Sciences of Ukraine”.

Unpacking the heterogeneous relationship between economic freedom, corruption and income inequality: a cross-country comparison

ABSTRACT Rising globalization, tech breakthroughs, and market shifts increased income inequality. COVID-19 worsened it, emphasizing the issue’s global permanence. This study examines economic freedom’s impact and corruption’s moderating role on income inequality in BRICS and Next-11 countries from 1995 to 2021. Panel quantile regression and Panel ARDL were used to analyse data. Results show economic freedom’s positive impact on income inequality in the overall sample, as well as in BRICS and Next-11 countries. Control of corruption reduces inequality, but interaction with economic freedom worsens its impact. Economic freedom counteracts corruption control’s benefits on inequality.

The impact of tax deduction on inequality in Russia

The article examines the impact of tax deductions for education and healthcare on income inequality in Russia. The objective of the study is to quantify the redistributive effects of this fiscal measure. Additionally, the paper assesses the potential effects of proposed reforms to tax deductions, with a particular focus on changes proposed in the President’s Address to the Federal Assembly in February 2023 and implemented in 2024. The study uses data from the Federal Tax Service and the Russia Longitudinal Monitoring survey of the National Research University Higher School of Economics (RLMS-HSE), in conjunction with the microsimulation model RUSMOD, which enables the estimation of the short-term redistributive effects of changes in taxes and transfers. The study demonstrated that the current tax deductions for education and health care have a marginal impact on income inequality. Conversely, if tax deductions are reformed in a manner that increases their limits and take-up, this may result in an increase in income inequality.

When education is positional: higher education expansion, welfare regimes and income inequality

Abstract Rectifying the imbalance of theorisation of education expansion focusing on its benefits, this study examines the relationship between education expansion and income inequality by turning our attention to its risky aspects. We investigate how expanding education might not effectively mitigate income inequality, because it brings about costly and risky competition for the positional value of education. We consider welfare regimes as relevant institutional factors associated with educational positionality based on the similarities between two environmental conditions that make education positional and two underlying dimensions of welfare regimes (de-stratification and commodification). We analysed higher education cases in twenty-four to twenty-five developed countries from 2000 to 2020. Our results show that higher education expansion initially reduced income inequality, but the reducing effect was attenuated, and eventually, it increased income inequality when higher education was positional, corresponding to the countries with a liberal regime and two East Asian countries such as Japan and Korea.

How do air pollution and population migration influence income inequality in China

This study aims to investigate the impacts of air quality and population migration on income inequality in China. It introduces a general equilibrium model that air pollution triggers population outflow. The findings reveal that both absolute and relative air pollution cause population outflow and exacerbate income inequality. Using panel data of 292 Chinese cities in 2001–2020, this study finds that deteriorations in air quality—both in absolute and relative terms—widen the income gap but can mitigate income inequality through population outflow. Robustness tests support these findings. This study also uses data from A-share listed companies in China from 2010 to 2020 to explore the nexus between air pollution, human capital, and income inequality. It finds that increased absolute and relative air pollution decrease human capital and increase income inequality. Furthermore, a decrease in employee human capital (non-talents outflow) reduces intra-company income gap. This decrease is caused by a decrease in senior executives’ earnings compared to an increase in general employees’ compensation. However, a reduction in the human capital of senior executives (talents outflow) increases income inequality by boosting the earnings of senior executives.

Energy Poverty and Environmental Quality Nexus: Empirical Evidence from Selected South Asian Countries

South Asian countries are included in the economies of developing Asia. The region of South Asia is predominantly affected by energy poverty issues due to a heavy reliance on conventional energy and unpredictable access to energy services. It has about a quarter of the world's population and is home to three of the world's ten most populated countries: India, Pakistan, and Bangladesh. This study investigates environmental sustainability dynamics in South Asian countries from 2000 to 2021, utilizing the Cross-sectional Autoregressive Distributed Lag (CS-ARDL) and Dumitrescu-Hurlin (D-H) causality methods. The research offers insights into the long-term trends and causal relationships that shape environmental outcomes in South Asian nations. Based on empirical findings, in the long-term, it is revealed that increases in energy poverty, economic growth, income inequality, and capital formation raise greenhouse gas (GHG) emissions, while renewable energy and labor reduce GHG emissions. On the other hand, the error correction term shows the speed of adjustment toward equilibrium at 0.75%. Furthermore, the D-H panel causality reveals a directional link between variables. These findings highlight the urgent need for South Asian countries to implement policies to address energy poverty, promote renewable energy adoption, and reduce income inequality to mitigate GHG emissions and achieve long-term environmental sustainability effectively.

The price of inequality: How state tax policies widen the wealth gap

State taxation has become particularly regressive in recent decades. Across the country, states have increasingly begun to rely on sales and consumption taxes to fund significant portions of their expenditures. Given that these taxes disproportionately hurt lower classes that spend a larger portion of their income on consumable goods and services, these trends widen wealth gaps. By replacing and reducing progressive income taxes with these regressive forms of taxation, levels of inequality have risen. This paper examines the impact of such state and local taxes on the levels of income inequality within each state. Through empirical analysis, it identifies a substantial and positive correlation between the regressivity of state tax codes, as measured by the relative tax burdens on different income brackets, and the levels of inequality, as quantified by the income share of the top 1%. In this study, I examine the relationship between state tax policies and income inequality in the United States. By analyzing the tax structures of different states, I identify a significant correlation between regressive taxes, that disproportionately burden the less wealthy, and increased income inequality. Using quantitative data from 2013 to 2019, I show that states that rely more on taxes that burden working class families, like sales and excise taxes, witness larger portions of wealth concentration within the top 1%. These findings suggest that tax policy at the state level significantly shapes wealth distribution and highlight the need for reforms to reduce inequality at the state level.

Income inequality: The effects of public education expenditure and information and communications technology in sub-Saharan Africa

Background: As nations globally strive to meet the United Nations Sustainable Development Goal (SDG) 10, which underscores the reduction of inequality, there is an increasing need to harness the power of education and information and communications technology (ICT) to achieve this aim. Therefore, this study is motivated by this rationale.Aim: The synergistic effect of government spending on education and ICT on income inequality in sub-Saharan Africa (SSA) in the long run.Setting: Panel data for 30 SSA countries from 1990 to 2022 are used.Method: This research used the Fully Modified Ordinary Least Square (FMOLS) technique, which provides long-run estimates, to achieve the aim of the article.Results: The FMOLS results reveal that public education expenditure increases income inequality while its squared expenditure reduces it in the long run. However, over time, ICT diminishes inequality. Notably, the combined effect of public education spending and ICT strengthens the effect of public education expenditure on income inequality in SSA in the long term.Conclusion: In summary, with the incorporation of additional control variables in the analyses, it suggests that SSA’s governments, along with policymakers, have the opportunity to achieve income inequality reduction by strategically making use of public education spending and ICT.Contribution: This article adds significant value to the literature by demonstrating the effect of public education spending and ICT on income inequality in SSA (characterised by higher level of income inequality). To mitigate concerns regarding endogeneity, this article uses FMOLS.

DETERMINANTS OF INCOME INEQUALITY IN THE SELECTED GROUP OF EUROPEAN COUNTRIES: A PANEL DATA ANALYSIS

The paper focuses on providing basic characteristics of income inequality in a group of selected European countries in the period from 2000 to 2019. After presenting stylized facts and brief literature review, the paper proceeds to empirical analysis of income inequality in the observed countries by panel data techniques. Fixed and random effects models are estimated. After Hausman test approved the usage of fixed effects model, it was tested for serial correlation and robust standard errors were calculated. The empirical analysis of the determinants of income inequality shows that GDP growth, share of population in upper 10% of income percentile, Human Development Index and unemployment rate increase income inequality measured by Gini index, while share of workforce and share of population with tertiary education decrease income inequality. The results of the empirical analysis provide insight into determinants of income inequality, which may be useful for economic policy decision makers in their efforts to decrease the income inequality.

The effect of the Public Order Act of 1994, (Act 491) on Democracy in Ghana

Background: The thirty-year-old Public Order Act of Ghana of 1994 (Act 491), is seen as archaic legislation over the people’s civil libertarian rights to assemble in protest against inimical and corrupt government actions. It has become the bane of democratic development in Ghana, preventing the citizens right to conduct non-violent civil disobedience acts, and seen as anti-establishment act. Methods: This is an exploratory as well as retrospective review of government security apparatchik’s interpersonal relationship with the Ghanaian public who engage(d) in non-violent demonstrations and protests since the promulgation of the act. Results: The assessment revealed that, for the average Ghanaian citizen, his or her only means of getting the attention of government is through public demonstration or protest. The Parliamentarians for their constituencies are disconnected from them giving them no avenue for the redress of grievances. It also found that, the international development partners operating in Ghana are perceived to be siphoning the life-blood out of the people of Ghana, sort of domestic economic hit men, who promote Ghana as a democracy despite the realities on the ground, due to the effect of their role on increasing income inequalities among the populations. Conclusion: Despite the persistent denial of the public’s right to assemble and protest against government conduct: corruption, stealing, extravagant living and spending, denial of meritocratic job placement, and the harm caused to their freedoms, the international development partners and nations continue to issue endorsements to the government as running a democratic system, despite evidence-based corruption, indebtedness to both international and domestic creditors and poor socio-economic outcomes for the people of Ghana due poor leadership and management of the economy.

A Policy Proposal to Strengthen the Income Redistribution Function of the National Pension Scheme in South Korea: An Analysis of South Korea’s 5th National Pension Comprehensive Plan (Draft)

In this study, we elucidate the income redistribution effects of the proposal to incorporate the Bend Points mechanism of the U.S. OASDI into the Korean National Pension Scheme (BP-KNPS Proposal) through a micro-simulation analysis using individual data from the Korean Labor and Income Panel Study (KLIPS). In addition to examining the effects of introducing the BP-KNPS Proposal into the current National Pension Scheme (NPS), we also consider the impact of this scheme being combined with the 5th National Pension Comprehensive Plan (Draft), announced by Korea’s Ministry of Health and Welfare on 30 October 2023. When the BP-KNPS Proposal is introduced into the current NPS, the Mean Log Deviation (MLD) of the net transfer amount (lifetime pension benefits minus lifetime pension contributions) for regular employees decreases from 0.2022863 to 0.1929960. Similarly, the MLD for self-employed and irregular workers decreases from 0.2046127 to 0.1721433, indicating a reduction in income inequality. Furthermore, when the BP-KNPS Proposal is combined with the 5th National Pension Comprehensive Plan (Draft), the effects are mixed. The proposals to increase the pension contribution rate and adjust the rate increase speed via generation lead to a reduction in income inequality compared to the current NPS when combined with the BP-KNPS Proposal. However, the proposals to raise the pensionable age result in increased income inequality, similar to the outcomes under the current system. This finding suggests that the triple burden identified by literature review—the reduction in benefits due to disparities in contribution periods and life expectancy, and the raised pensionable age—has a greater impact on low-income participants than the inequality-reducing effects of the BP-KNPS Proposal.

Pengaruh Transformasi Struktural dan Pertumbuhan Ekonomi terhadap Ketimpangan Pendapatan di Sulawesi Tenggara

Economic development basically focuses its attention on the process of changing the underdeveloped economic structure so as to enable the emergence of new industries to replace the agricultural sector as the driving force of economic growth. The industrial sector has the largest contribution to the formation of the Gross Regional Domestic Product in Southeast Sulawesi Province. However, when considering employment absorption by sector, the concentration of labor absorption remains focused on the agriculture and services sectors. The industrial sector has the smallest share in terms of employment absorption among sectors in Southeast Sulawesi Province. The aim of this research is to analyze the influence of structural transformation and economic growth on income inequality in Southeast Sulawesi Province. The method used is panel data regression analysis. Research findings show that the transformation of the industrial sector, the transformation of the industrial sector without mining, and economic growth have a negative impact on income inequality. Meanwhile, the service sector transformation variable and economic growth without the mining subsector have a positive impact on increasing income inequality in Southeast Sulawesi Province.

Impact of e-commerce on income inequality: evidence from rural China based on cross-county panel data

ABSTRACT Although information and communications technologies (ICTs) are developing rapidly worldwide, evidence of the relationship between e-commerce and regional income inequality in the rural areas of a developing country remains scarce. Using original cross-county panel data, this study investigates the impact of e-commerce on regional income inequality in rural China, taking into consideration endogeneity issues. The results indicate that e-commerce may increase income inequality in developed counties but reduce income inequality in the less-developed counties; however, the total effect of e-commerce on overall income inequality is insignificant. The decomposition results show that differences in e-commerce accessibility contribute to widening the income inequality between developed and less-developed counties. In contrast, the differences in the income returns of e-commerce usage contribute to reducing income inequality. The empirical results suggest that a policy promoting e-commerce development may reduce income inequality in less-developed regions.

Not all banking crises are alike: Assessing their distributional impacts relative to pre-crisis credit gaps

The empirical literature on the effects of banking crises on income inequality has yielded mixed findings. In this paper, we aim to reconcile these mixed results by evaluating the effects of banking crises on income inequality in relation to pre-crisis credit gaps. We apply the Local Projections methodology to a yearly panel of 68 banking crises that occurred in 59 countries over the period 1970–2017. Three key results emerge. First, banking crises lead to increased income inequality. Second, only those banking crises preceded by larger credit gaps show a significant increase in income inequality. Third, a deeper contraction in the credit supply and a higher unemployment rate are two channels that could potentially explain why inequality rises more after banking crises with larger pre-crisis credit gaps. These results underscore the importance of macroprudential policies that, as well as limiting the amplitude of the financial cycle and the associated risks of financial crises, could also play a key role in reducing the distributional consequences of banking crises.

Inequality and risk preference

AbstractThis paper studies the relationship between income inequality and risk taking. Increased income inequality is likely to enlarge the scope for upward comparisons and, in the presence of reference-dependent preferences, to increase willingness to take risks. Using a globally representative data set on risk preference in 76 countries, we empirically document that the distribution of income in a country has a positive and significant link with the preference for risk. This relationship is remarkably precise and holds across countries and individuals, as well as alternate measures of inequality. We find evidence of a steeper gradient between willingness to take risks and inequality for cognitively more able individuals who likely have a better assessment of inequality and for those who are dissatisfied with their income. We present results in favour of our mechanism, which suggests that falling behind one’s reference group increases the appetite for risk taking.

Influence falling income inequality for social stability: Case study of four European countries

AbstractThis study aims to assess the relationship between income inequality and social solidarity as a measure of societal stability, using European countries as a case study. Data from 20 European countries were included in the research. The primary dependent variable was defined as social solidarity, serving as an indicator of societal stability. The analysis of social solidarity was conducted concerning various social groups, including overall solidarity and solidarity towards vulnerable societal categories. Responses to questions were evaluated using the Likert scale. Income inequality within each country, measured by the Gini coefficient, was designated as the explanatory variable. Control variables were incorporated, including GDP per capita and the percentage of social expenditure relative to a country's GDP. The conducted analysis demonstrates a negative correlation between income inequality and the manifestation of social solidarity. The analysis of individual characteristics reveals that specific groups exhibit greater social solidarity compared to others. The conclusion drawn is that both lower and higher household income levels lead to a decrease in the overall manifestation of social solidarity in the face of increasing income inequality. The study's findings contribute theoretically to the discourse on income inequality and its impact on societal stability.

Impact of digital divide on energy poverty across the globe: The mediating role of income inequality

Energy poverty is an important reality facing the whole world, and the rapid development of digital technology has great potential in eradicating poverty. However, the differences in the level of information development have led to the existence of the digital divide within countries. In this context, this paper explores whether and how the digital divide affects energy poverty from a global perspective. Based on cross-country panel data, this study focuses on the effect and asymmetry of the digital divide on energy poverty. The results show that the digital divide hinders the reduction of energy poverty and manifests itself in a Matthew effect that makes the energy poor poorer. Second, the heterogeneity analysis based on income level and rural-urban areas find that the digital divide has a greater negative impact on energy poverty in low-income countries and rural areas. Finally, the mechanism analysis reveals that the digital divide exacerbates energy poverty mainly by increasing income inequality. Therefore, there is a greater need to focus on the efficiency, equity and inclusive development of the digital economy in the process of its globalization. The findings can also provide an empirical basis for policy design to bridge the digital divide and alleviate energy poverty.

Labour market and income inequalities in the Netherlands, 1977–2022

AbstractWe study how changes in labour market outcomes and household composition translate into changes in household incomes in the Netherlands over the period 1977–2022. During this period, the Netherlands witnessed a vast increase in female employment and earnings. This was also the key driver of household income growth. Male employment hardly changed, and male earnings growth was limited, and hence contributed little to household income growth. The increase in employment and earnings was the most pronounced for lower‐educated women and women with relatively low earnings. The resulting drop in earnings inequality among women also put a drag on the rise in household income inequality, together with an increase in social benefits and a reduction in taxes for the bottom of the household income distribution. However, overall there was still a small increase in disposable household income inequality because inequality in male earnings increased, with earnings falling in real terms for men with low earnings and rising somewhat for men with high earnings. Furthermore, the proportion of singles increased, in particular among low‐earning men and women, and assortative matching on earnings in couples increased. We further show that despite still having relatively low household income inequality overall, a large gap remains between immigrants and natives.

Analyzing the Impact of Fiscal and Monetary Policies on Income Distribution in Central Asian Economies

Abstract This study examines the impacts of macroeconomic policies (i.e. fiscal policy through government consumption spending and total tax revenue, and monetary policy through broad money and real interest rate) along with other regressors such as inflation, Gross Domestic Product (GDP) per capita, remittances, exchange rate, and financial development on income distribution in four Central Asian countries from 1995 to 2020. After conducting unit root tests, the Autoregressive Distributed Lag (ARDL)/Pooled Mean Group (PMG) approach was implemented for empirical analysis. The results show that both fiscal and monetary policies have positive and negative effects on income inequality. Moreover, inflation is found to increase income inequality, while financial development, higher levels of per capita income, and foreign remittances decrease inequality in the panel and individual country analyses. These findings suggest that coordinated policies, along with increased remittances and financial sector development, are needed to reduce income inequality.

Impact of climate change on income inequality. Implications for rich and poor countries

The article aims to provide evidence of the link between income inequality and climate change in both developed and low-income economies. This study uses a descriptive analysis method along with panel data analysis to assess the impact of climate changes on income inequality in 42 advanced economies and 68 developing countries between 1995 and 2020. The results of empirical research confirm that climate change is an important factor responsible for growing income inequality. The impact of a country’s vulnerability is positively associated with increasing income inequality in low-income economies. In turn, climate resilience has a statistically significant effect on income distribution in both groups, although the ability to mitigate climate change and adapt is considerably weaker in developing countries. This research raises our awareness of the links between the economy and climate change, including their implications for income inequality, and signals possible changes in the redistributive system to mitigate climate change and combat income inequality. The added value of this article is the results of research on the negative consequences of climate change on income inequality in over 100 countries. Particular attention was paid to the ethical issue of unequal responsibility for causing climate change between rich and poor countries.