Measures Of Income Inequality Research Articles

The role of loan loss provisions in income inequality: Evidence from a sample of banking institutions

This study explores the empirical link between income inequality and banks’ Loan Loss Provisions (LLPs) through a sample of banking institutions from 132 countries, applying a panel regression methodology. The evidence reveals that higher LLPs have a positive impact on income inequality, and the findings remain valid across various model specifications and income inequality measures. The results also hold against various robustness tests, such as different bank sizes, developed vs. emerging countries, the impact of the 2008 global financial crisis, and the controlling for risk. The implications are relevant for stakeholders, including regulators that endeavor to protect banking systems against expected and unexpected losses via LLPs. Specifically, since credit decisions have substantial effects on income inequality, regulators should mitigate the accumulation of LLPs, allowing more funds to be available for other banking system activities and functions.

Cultivating Quantitative Literacy in the Introductory Course: A Mathematics Education Collaboration to Teach the Gini Coefficient

We report on a cross-disciplinary collaboration between sociology and mathematics education to more effectively cultivate quantitative literacy (QL) in the introductory sociology course. Focusing on an instructional unit presenting the Gini coefficient (the most commonly used summary measure of income inequality), we engaged in iterative cycles of presentation, assessment, and redesign across four semester-long courses. Assessments were guided by insights from mathematics education—such as the procedural/conceptual distinction, student misconceptions, and student noticing—and characterized by extensive informal discussion and analysis of patterns in student exam responses. Assessments were formalized via coding of specific response elements and used to identify strategic foci for revision and redesign (including creating a brief instructional video series and an active learning exercise). In this article, we highlight the value of cross-disciplinary collaboration in QL pedagogy, demonstrate the effectiveness of analyzing specific elements and patterns of student comprehension to revise pedagogical presentation, and advocate for the strategic utility of the Gini coefficient for cultivating QL in introductory sociology.

Measuring income inequality via percentile relativities

AbstractThe adage “the rich are getting richer” refers to increasingly skewed and heavily-tailed income distributions. For such distributions, the mean is not the best measure of the center, but the classical indices of income inequality, including the celebrated Gini index, are mean based. In view of this, it has been proposed in the literature to incorporate the median into the definition of the Gini index. In the present paper we make a further step in this direction and, to acknowledge the possibility of differing viewpoints, investigate three median-based indices of inequality. These indices overcome past limitations, such as: (1) they do not rely on the mean as the center of, or a reference point for, income distributions, which are skewed, and are getting even more heavily skewed; (2) they are suitable for populations of any degree of tail heaviness, and income distributions are becoming increasingly such; and (3) they are unchanged by, and even discourage, transfers among the rich persons, but they encourage transfers from the rich to the poor, as well as among the poor to alleviate their hardship. We study these indices analytically and numerically using various income distribution models. Real-world applications are showcased using capital incomes from 2001 and 2018 surveys from fifteen European countries.

Towards Efforts to Equalize Income in Africa: The Role of Tourism Development

ABSTRACT A vast literature has investigated the nexus between tourism and income inequality in developing and developed countries. Unfortunately, the literature on the impact of tourism on income inequality in Africa is sparse. Hence, this study examines the influence of tourism on income inequality in 30 African countries over the period 1996–2020. In addition to international tourism arrivals and international tourism receipts which have been widely used by previous studies, this study uses a plethora of tourism indicators, namely business tourism spending, leisure tourism spending, internal travel and tourism consumption, domestic tourism spending, and visitor exports. Moreover, unlike previous studies that have extensively used the Gini index with its inadequacy as a measurement of income inequality; this study uses the Atkinson index and Palma ratio to capture extreme points of the inequality distribution. The empirical evidence is based on the panel-corrected standard error (PCSE) estimation technique. The results reveal that tourism contributes to the equalization of income in Africa, contingent on the type of tourism. Policy implications are discussed.

Socioeconomic inequalities and the role of sectoral foreign aid in developing countries

AbstractUsing a panel threshold regression approach, we consider multiple dimensions of socioeconomic inequalities and examine their heterogeneous relationships with sectoral foreign aid. Conditioned on the level of socioeconomic development, three types of inequality and four channels of sectoral foreign aid are considered. We use a comprehensive dataset covering 65 aid‐recipient countries from 1990 to 2017 and find that education aid effectively reduces inequalities but only when the level of institutional quality and other socioeconomic factors is above its 75th percentile value in our sample. These results are robust to alternative measures of income inequality, aid and estimation strategies.

ASSESSING THE IMPACT OF CORRUPTION ON INCOME INEQUALITY

This article is devoted to the study of the impact of corruption on income distribution. The study reveals statistically significant associations between the level of corruption and income inequality in Kazakhstan by applying least squares linear regression models. The paper uses the Corruption Perception Index as a measure of corruption and the Gini Index as a measure of income inequality. The paper also analyzes the impact of corruption on income inequality in other countries. This made it possible to determine the specifics of such an impact in countries with different levels of economic development. The results of the study showed that a decrease in the level of corruption, expressed as an improvement in the Corruption Perception Index, is associated with a decrease in income inequality, expressed as the Gini Index. The study also found that population growth has high statistical significance and is associated with a significant reduction in the level of social inequality in Kazakhstan. This confirms that population growth is predominantly observed among the less well-off strata of society, which leads to an increase in the Gini coefficient.

Income inequality and carbon emissions in Asia: Does financial inclusion matter?

AbstractThe upsurge in the amount of carbon emissions in Asia has been potentially due to the increasing income disparities in the region. Meanwhile, with the increasing level of digital financial services, the digital approach to financial inclusion could complement the traditional approach. Therefore, we investigate the impact of income inequality on carbon emissions across 17 Asian countries for the period 2011 to 2022. We also investigate the effects of traditional and digital financial inclusions on the relationship between income inequality and CO2 emissions. This study employs the panel fixed‐effect estimator, Quantile regressions, and 2SLS to estimate the model specifications of the study. Findings reveal that income inequality has a positive and significant impact on CO2 emissions in both linear and non‐linear models. Findings also show that both traditional and digital financial inclusion significantly moderate the relationship between income inequality and CO2 emissions, with digital financial inclusion having a lesser impact. The study further finds that economic freedom is the transmission channel through which income inequality impacts CO2 emissions, suggesting that higher income disparities lower economic freedom, which further contributes to the amounts of CO2 emissions. Our findings theoretically support the marginal propensity to emit theory and the environmental Kuznets curve hypothesis. Our findings are robust to alternative measures of income inequality, CO2 emissions, and endogeneity concerns.

Income Inequality and External Wealth of Nations

Abstract We study the relationship between income inequality and external wealth using dynamic panel data models with 5-years average observations to consider the slow motion of available data in the case of 88 emerging and developing economies for the period 1970–2020. We find evidence of a significant positive association between inequality indicators and net external wealth. This relationship is statistically significant for all income inequality measures and net external wealth variables. If the Top 1 of the richest individuals in a given country increments their share by 1 % point this will produce an average same-year increment in net foreign assets of 0.45 % in terms of the country’s GDP. The long-run effect is more than double in magnitude (1.05 % of GDP). For the Top 10, the long-run effect increases tenfold (11.6 % of GDP). When disaggregated into foreign assets and liabilities, we find a heterogeneous behavior of the financial elites. These findings reveal that financialized elites have a greater propensity to accumulate external wealth than the rest of the population.

Does institutional quality moderate the human capital–inequality dynamics? Comparative evidence from LAC and SSA countries

AbstractAligning with Sustainable Development Goal 10, this study probes whether quality institutions matter in the drive towards reducing income inequality through human capital. An unbalanced panel data on the Gini index (measure of income inequality), human capital index and institutional quality index drawn across 83 Latin America and sub‐Saharan African (SSA) countries from 2010 to 2019 is used. For the most part, the consensus is that the interaction of human capital and quality institutions significantly reduces income inequality. For context, inequality reduces by −7.810 and −21.30 points for the full and SSA samples. Other findings reveal that the interaction effect is consistently negative at upper quantiles. Evidence from the margin plots reveals that the effect of human capital on inequality improves as institutional quality is strengthened. The downward trend of the plot within the 95% confidence interval shows that institutional quality enhances the impact of human capital on income inequality for the full sample and in SSA. This is a novel contribution to the literature as it suggests that quality institutions matter in the drive towards reducing the menace of income inequality. Policy recommendations are discussed.

Structural transformation and inequality: Does trade openness matter?

AbstractThe purpose of this paper is to examine income inequality in the process of economic growth and structural transformation with emphasis on the role of economic openness using a new measure of trade openness (the price convergence index [PCI]), which is an alternative measure to the widely used trade‐to‐GDP ratio. The analysis is based on a multi‐country panel data covering 48 countries for the period from 1960 to 2010. The results suggest that an increase in the share of employment in manufacturing is associated with a reduction in income inequality. This inequality‐reducing effect is significantly greater for countries with more open trade regimes. In addition, the Kuznets‐type relationship exists between services employment share and income inequality, with inequality first increasing with the movement of workers from agriculture to services and then decreasing. This inequality‐increasing effect of services employment share is also larger for countries with more open trade regimes. The findings withstand the inclusion of relevant explanatory variables, an alternative measure of income inequality, and alternative estimator to address possible endogeneity.

Socioeconomic inequalities in adolescent mental health in the Nordic countries in the 2000s - A study using cross-sectional data from the Health Behaviour in School-aged Children study

BackgroundAdolescents in Sweden experience more mental health problems and lower mental well-being than adolescents in other Nordic countries. According to the literature, one possible explanation may be differences in income inequality. The at-risk-of-poverty rate varies significantly across the Nordic countries, and the highest rate is found in Sweden. The aims of the study were to examine socioeconomic inequalities in subjective health complaints and life satisfaction among adolescents in the Nordic countries during 2002 − 2018 and to explore whether subjective health complaints and life satisfaction were related to income inequality in terms of the at-risk-of-poverty rate at the country level.MethodsData regarding 15-year-olds from the Health Behaviour in School-aged Children study from five survey rounds (2002 − 2018) were used (n = 41,148). The HBSC Symptoms Checklist and Cantril’s ladder were used as measures of subjective health complaints and life satisfaction, respectively. The Family Affluence Scale, the Perceived Family Wealth item and the at-risk-of-poverty rate in each country were used as measures of individual-level socioeconomic conditions and country-level income inequality. Statistical methods involved ANOVA, multiple linear regressions and multilevel regression analyses.ResultsAbsolute and relative socioeconomic inequalities in both subjective health complaints and life satisfaction were found in all countries. Sweden showed average socioeconomic inequalities, Iceland the largest and Denmark the smallest. Country-level income inequality in terms of the at-risk-of-poverty rate was associated with a higher prevalence of subjective health complaints and lower levels of life satisfaction in all countries.ConclusionSocioeconomic inequalities in adolescent mental health and well-being persisted in Nordic countries in the 2000s. Increasing income inequality may have contributed to higher levels of SHC and lower LS in Sweden compared to the other Nordic countries. Policies improving families’ socioeconomic conditions and reducing income inequality at the country level are needed to improve and reduce inequalities in mental health and well-being among adolescents.

Income inequality and party alternation: State‐level evidence from the United States

AbstractUsing multiple measures of income inequality and political party alternation for US states we examine panel data from 1971 to 2015 to test whether income inequality affects party alternation for governors. We test various measures of party alternation at the state level. The evidence suggests that income inequality increases party alternation and has a nonlinear relationship with gubernatorial‐party alternation. Income inequality backlash is more evident for Republicans and favors Democrats when inequality is high, with the opposite being true. Results vary with the choice of inequality and party alternation measures, which suggests income inequality for states should be further examined.

Horizontal Economic Inequality and Mass Atrocity Risk: A Large-Sample Empirical Inquiry

Our research question is: Does inter-group horizontal economic inequality elevate state-perpetrated mass atrocity risk? Theoretical perspectives in genocide studies show how economic and other forms of discrimination against ethnic or religious groups can elevate the risk of government violence against them. Among the approximately five dozen large-sample empirical studies of mass atrocity risk, only a few consider the effects of economic discrimination. Moreover, no large-sample empirical studies, to the best of our knowledge, test hypotheses related to how inter-group horizontal economic inequalities (as distinct from vertical economic inequalities based on GINI coefficients or quantile income or wealth measures) affect mass atrocity risk. Drawing upon two data sources, we construct four horizontal economic inequality measures for groups within nations. The measures relate to access to economic resources in general and to electricity in particular. We then empirically test hypotheses related to horizontal economic inequality and mass atrocity risk for a sample of 175 nations spanning the period 1946–2019. We find modest support that horizontal economic inequality elevates mass atrocity risk broadly defined, but not genocide risk. We also find that vertical income inequality measures do not usually elevate mass atrocity or genocide risk.

New approach to measuring income inequality

We show that the conventional income inequality indexes assess income inequality incorrectly because of three problems. The unequally distributed (UD) income-based approach solves the problems, decomposes income inequality into two kinds of departure from equality, and provides two indexes. The comprehensive assessment of income inequality requires the integration of two kinds of departure. This paper proposes the relative UD (RUD) income-based approach. The RUD income-based approach combines the cumulative distribution function and quantile function of the RUD income and produces a new index integrating two kinds of departure. We investigate the properties of the new index and demonstrate its applicability through example income distributions.

Causal Assessment of Income Inequality on Self-Rated Health and All-Cause Mortality: A Systematic Review and Meta-Analysis.

Whether income inequality has a direct effect on health or is only associated because of the effect of individual income has long been debated. We aimed to understand the association between income inequality and self-rated health (SRH) and all-cause mortality (mortality) and assess if these relationships are likely to be causal. We searched Medline, ISI Web of Science, Embase, and EconLit (PROSPERO: CRD42021252791) for studies considering income inequality and SRH or mortality using multilevel data and adjusting for individual-level socioeconomic position. We calculated pooled odds ratios (ORs) for poor SRH and relative risk ratios (RRs) for mortality from random-effects meta-analyses. We critically appraised included studies using the Risk of Bias in Nonrandomized Studies - of Interventions tool. We assessed certainty of evidence using the Grading of Recommendations Assessment, Development and Evaluation framework and causality using Bradford Hill (BH) viewpoints. The primary meta-analyses included 2,916,576 participants in 38 cross-sectional studies assessing SRH and 10,727,470 participants in 14 cohort studies of mortality. Per 0.05-unit increase in the Gini coefficient, a measure of income inequality, the ORs and RRs (95% confidence intervals) for SRH and mortality were 1.06 (1.03-1.08) and 1.02 (1.00-1.04), respectively. A total of 63.2% of SRH and 50.0% of mortality studies were at serious risk of bias (RoB), resulting in very low and low certainty ratings, respectively. For SRH and mortality, we did not identify relevant evidence to assess the specificity or, for SRH only, the experiment BH viewpoints; evidence for strength of association and dose-response gradient was inconclusive because of the high RoB; we found evidence in support of temporality and plausibility. Increased income inequality is only marginally associated with SRH and mortality, but the current evidence base is too methodologically limited to support a causal relationship. To address the gaps we identified, future research should focus on income inequality measured at the national level and addressing confounding with natural experiment approaches.

Gender differences in the relationship between income inequality and health in China: Evidence from the China Health and Nutrition Survey data

This study examines gender differences in the relationship between income inequality and health in China. Multilevel regression models were used to analyse data from the most recent five waves (2004–2015) across 12 provinces in the China Health and Nutrition Survey (CHNS). The findings remain robust when considering alternative measures of health outcomes and income inequality. Men showed greater sensitivity to income inequality in terms of adverse health outcomes. When individuals experienced the same level of changes in income inequality, men had a higher risk of reporting poor health status, higher BMI, higher systolic blood pressure, and a higher risk of smoking cigarettes and drinking alcohol than women. Despite missing data and causal inference challenges, this study highlights gender differences in the relationship between income inequality and health in China, potentially attributed to cultural gender norms. Double standards regarding weight and health-compromising behaviours based on gender roles and stereotypes are more intensive in China, particularly in areas with higher income inequality. One policy implication of this study is that reducing income inequality could enhance individual health outcomes, with a more notable impact on men's health compared to women's.

Nexus Between Democracy, Corruption, and Income Inequality in South Asia

This study explores the interplay between corruption, democracy, and income inequality in South Asia, analysing data from 2012 to 2022. It incorporates variables from the Transparency International Corruption Perception Index (TI-CPI), Democracy Index by the Economist Intelligence Unit (EIU), and measures of income inequality, in addition to other control variables relevant to political governance and economic performance. Utilising the Feasible Generalised Least Squares (FGLS) approach, the research reveals that democracy, regulatory quality, income inequality, and population growth are associated with increased corruption, while effective corruption control, rule of law, and economic growth contribute to its reduction in the region. These findings offer valuable insights for policymakers on enhancing democratic structures, governance efficiency, and the rule of law to combat corruption in South Asia. JEL Classification Codes: O15, D73

INCOME INEQUALITY AND ECONOMIC GROWTH AT THE EUROPEAN UNION

Economic growth has several determinants, however, there is little research on the effect of income inequality on economic growth. In the case of the European Union, there are countries with different varieties of capitalism, which leads a significant variation in the levels of inequality between countries. The paper aims to estimate the effect of income inequality on the economic growth of the Member States of the European Union, considering different types of income inequality: Gini index, top 1% share and top 10% share. We used a dynamic and static panel that models which measure the effect of inequality on the economic growth of the Member States of the European Union. The results show that the type of inequality variable affects the relationship between the income inequality and economic growth, in addition to the fact that the indicators that measure income inequality have a negative and positive impact on the economic growth on the Member States of the European Union.

Economic growth and income inequality in sub-Saharan African countries: A test of Kuznets’ hypothesis

In this study, the influence of economic growth on income disparities in 29 sub-Saharan African (SSA) countries is investigated for the period 2005-2015. The primary objective of the study is to empirically test Kuznets? hypothesis, which holds that there is an inverted U-shaped relationship between economic growth and income inequality. The study examined this relationship using four proxies for income inequality: the composite inequality index, the Atkinson index, the Gini coefficient, and the Palma ratio. Using a modified version of a difference generalised method of moments (GMM) estimation technique, it was found that regardless of the proxy used to measure income inequality, there is a consistently significant negative relationship between income per capita (y) and income inequality in the countries under study. A consistent positive relationship was also found between the square of income per capita (y2) and income inequality across all the proxies used in the study. The study found that the relationship between economic growth and income inequality follows a U-curve. The result suggests that while economic growth initially lowers income inequality, inequality eventually rises in tandem with growth. This suggests that the bulk of the studied economies in the SSA region are situated on the downward portion of the U-curve. The policy implications are discussed.

Does ICT diffusion validate skill-biased technological change hypothesis? Evidence from the post-Soviet countries

This study scrutinizes the impact of ICT diffusion on decomposed measures of income inequality in post-Soviet countries. We apply the Cross-Sectional Autoregressive Distributed Lags (CS-ARDL) approach to examine the dynamics of our panel time series data from 1991 to 2019. Empirical evidence suggests that ICT diffusion is negatively associated with the income of the top segments (the top 1 % and 10 %) of the population in the long term, while its impact is insignificant in the short term. Moreover, the ICT diffusion de facto (policy-implementation spectrum) primarily promotes the income share of the bottom class, probably by providing new market opportunities. The spread of ICT, in terms of policy decisions, leads to a notable decrease in the income proportion held by the top 10 % of earners, exhibiting the most significant level of responsiveness. Furthermore, our findings infer that government expenditure can also play a crucial role in reducing income inequality by decreasing the income portion of the top segment. The implications of our findings have direct relevance for policymakers in formulating effective strategies regarding ICT diffusion-income inequality nexus.