Personal Income Inequality Research Articles

Features of personal income inequality before and during the crisis: an analysis of Italian regions

ABSTRACTThis paper gives extensive evidence about disposable income inequality inside the regions of Italy and its associated population features. It explores whether the Great Recession changed income inequality within or between regions. Inequality appears largely to be a within-region problem, particularly in the South, and the crisis exacerbated this phenomenon. Middle-class women, migrants and large households in the middle/bottom classes, and bottom-class mothers worsened their income status with the crisis. Education was an important absorber for middle-class individuals, while married status and employment protected bottom-class individuals. Yet, large heterogeneity exists across regions.

Determinants of Private Savings in the Form of Bank Deposits: A Case Study on Regions of the Russian Federation

The paper is aimed at investigating the factors affecting the level of private deposits in banks in Russian regions and the verification of various theoretical concepts of personal savings. To achieve this purpose, we built a set of alternative Cobb–Douglas-type regressions with fixed time effects and logistic-type regressions based on panel data of 80 Russian regions from 2014–2016. Their estimations allowed us to reveal the dependence of private deposits in Russian regions at the level of real personal income and its structure, the personal income inequality, the demographic structure of the population, the state of the labor market, the level of accumulated wealth, the rate of urbanization, and the level of development of the financial system in the regions. Signs with variables summarize both direct and indirect effects of the input variables on the deposits, confirming some theoretical concepts and rejecting others, while the calculated elasticities show the strength of these effects. The results we obtained are applicable to the management of financial resources in Russian regions and the smoothing out of interregional differences in their development.

GLOBAL TRENDS IN INCOME DISTRIBUTION: LONG-RUN INFLUENCES ON INCOME INEQUALITY

This paper provides a comprehensive overview of the development in income distribution and outlines its major long-term trends of 23 countries worldwide. These countries are clustered in four groups covering the core advanced, the Nordic, the emerging, and the least developed economies of the world. This paper applies different measures to analyse income distribution in three dimensions: national income, functional income distribution, and personal income distribution. Depending on the indicators applied the time period ranges between 1960 and 2012. The empirical analysis shows that increases in national incomes are most pronounced in the advanced economies. The emerging economies also exhibit an upward trend in national income, but it has been less substantial. The least developed economies, however, have been detached from this trend and remain isolated. Moreover, this paper illustrates that there has been an enormous re-distribution of income. During the last three decades, the labour share of income has declined in nearly all countries under study. This development went hand in hand with increased personal income inequality. Disposable income inequality and market income inequality have both increased over the past 30 years. Wage dispersion also rose substantially contributing to greater income inequality. Additionally, the escalation of top income shares as well as the expansion of low paid employment has led to a growing gap between the top and the bottom income earners. This analysis also presents important interlinks between greater income inequality, the fall of the wage share, and increasing wage dispersion.

Personal income tax and income inequality in Ecuador between 2007 and 2011

This paper uses data from individual income tax returns to explore the redistributive effect of personal income tax in Ecuador between 2007 and 2011. Following common practice in tax incidence analysis, we first compute indices of income tax progressivity and redistributive impact. We then mobilize microsimulation techniques to simulate the redistributive effect of personal income tax under different taxable income scenarios. Finally, we calculate the effective tax rates paid by top income groups and derive a range of optimal income taxes for the top 1% income group. We obtain two main empirical results. First, although Ecuador’s personal income tax is highly progressive, its redistributive capacity is low: our findings show that high-income individuals are more likely to reduce their taxable income through legal tax deductions than low-income individuals. Second, while the effective tax rates paid by high-income individuals are relatively low, optimal tax rates could be as high as 63%.

Concentration of the Population and the Economy in the Capitals of Post-Soviet Countries

The paper examines factors and trends of concentration of the population and economy in the capitals of 11 countries of the former Soviet Union. Differences in population concentration dynamics over the post-Soviet period have been identified: partial deconcentration during the crisis-stricken 1990s and accelerated concentration since the 2000s. Strong differences in the concentration of the economy, industry, and investments in these capitals are shown to be largely governed by the size and economic structure of their respective countries. The absence of common trends in concentration of the economy in the capitals is shown. High concentrations of housing construction and retail trade that exceed population concentration have been revealed in almost all the capitals. The degree of personal income inequality in the capitals and in the countries outside the capitals is considered, which mainly determines the directions of labor migration: to capitals or outside the national territory.

Macroeconomic effects of personal and functional income inequality: Theory and empirical evidence for the US and Germany

This paper presents a simple post-Kaleckian model of distribution and growth that incorporates personal income inequality and interdependent social norms. The model shows in an easily accessible manner that macroeconomic effects of changes in personal and functional income distribution can potentially reinforce or dampen each other. The resulting variety of demand and growth regimes is due to different distributional effects on consumption demand. Therefore, the second part of the paper investigates the empirical relevance of the additional demand regimes by estimating aggregate consumption functions with variables for personal and functional income distribution for the United States and Germany. We find similar effects of functional income distribution for both countries. However, for the US, we find positive long-run effects of personal income inequality on consumption. The effect is strongest for the top 10% income share and the Gini index and less strong for the top 5% and 1% income shares. While this is evidence for relative consumption patterns, it also supports the view that the ?super rich? are a relatively distant class for most people - questioning the notion of expenditure cascades from the very top to the very bottom. In contrast, for Germany we fail to find compelling evidence for effects of personal income distribution.

Personal income taxation and income inequality in Asia-Pacific: a cross-country analysis

The article examines analyze current features of personal income taxation, and also the relationship between income inequality, individual income taxes and several labor market indicators in Asia-Pacific countries. The income inequality issue affects basic social and economic terms as equity and equality. The increase in income inequality in countries worldwide led to vigorous debate about efficiency of progressive individual income taxation as a tool for achieving optimal level of social equity. The purpose of the study is to examine the features of progressive individual income taxation and its influence of reduction of income inequality in Asia-Pacific countries. The article analyzes current systems of personal income taxation in countries of this region and their relationship with key macroeconomic indicators. The methodology includes cross-country comparisons, principal component analysis, regression analysis. The main theoretical results include identification of causes of inefficiency of progressive individual income taxation in analyzed countries. The empirical results are related to the estimation of influence of macroeconomic factors, including labor market indicators, on individual income tax revenue. The applied methods, notably principal component analysis combined with regression analysis, can be used for estimation of influence of both quantitative and qualitative factors on tax revenue. HIGHLIGHTS 1. The tax theory suggests that the progressive individual income tax system can be an effective tool for reduction of income inequality 2. For developing Asia-Pacific countries, the progressive personal income tax systems cannot contribute to the reduction of inequality since the tax base is narrow because of high free-tax thresholds and large informal sector of the economy 3. The developed Asia-Pacific countries have relatively high personal income tax revenues and low Gini coefficients, except Singapore with high income inequality level and GDP per capita similar to developed countries. One of the main reasons of high inequality in this country are the features of government tax policy 4. In developing Asia-Pacific countries only statutory nominal gross monthly minimum wage has significant impact on individual income tax revenue, and this impact depends crucially on the GDP per capita; the main reason are high tax-free personal income thresholds in these countries FOR CITATION Belozyorov S. A., Sokolovska O. V. Personal income taxation and income inequality in Asia-Pacific: a cross-country analysis. Journal of Tax Reform , 2018, vol. 4, no. 3, pp. 236–249. DOI: 10.15826/jtr.2018.4.3.054 ARTICLE INFO Received July 17, 2018; accepted August 20, 2018

Regional Economic Development in Europe, 1900-2010: A Description of the Patterns

We provide the first long-run dataset of regional employment structures and regional GDP and GDP per capita in 1990 international dollars, stretching over more than 100 years. These data allow us to compare regions over time, among each other, and to other parts of the world. After some brief notes on methodology we describe the basic patterns in the data in terms of some key dimensions: variation in the density of population and economic activity, the spread of industry and services and the declining role of agriculture, and changes in the levels of GDP and GDP per capita. We next discuss patterns of convergence and divergence over time and their explanations in terms of short-run adjustment and long-run fundamentals. Also, we document for the first time a secular decrease in spatial coherence from 1900 to 2010. We find a U-shaped development in geographic concentration and regional income inequality, similar to the finding of a U-shaped pattern of personal income inequality.

The effects of labour market reforms upon unemployment and income inequalities: an agent-based model

This paper is meant to analyse the effects of labour market structural reforms by means of an agent-based model. Building on Dosi et al., (2016b) we introduce a policy regime change characterized by a set of structural reforms on the labour market, keeping constant the structure of the capital- and consumption-good markets. Confirming a recent IMF report (Jaumotte and Buitron, 2015), the model shows how labour market structural reforms reducing workersu bargaining power and compressing wages tend to increase (i) unemployment, (ii) functional income inequality, and (iii) personal income inequality. We further undertake a global sensitivity analysis on key variables and parameters which confirms the robustness of our findings.

Contribution of Various Sources to Interregional Personal Income Inequality in Russia

Contribution of Various Sources to Interregional Personal Income Inequality in Russia

Income inequality in Romania: The exponential-Pareto distribution

Abstract We present a study of the distribution of the gross personal income and income inequality in Romania, using individual tax income data, and both non-parametric and parametric methods. Comparing with official results based on household budget surveys (the Family Budgets Survey and the EU-SILC data), we find that the latter underestimate the income share of the high income region, and the overall income inequality. A parametric study shows that the income distribution is well described by an exponential distribution in the low and middle incomes region, and by a Pareto distribution in the high income region with Pareto coefficient α = 2.53 . We note an anomaly in the distribution in the low incomes region ( ∼ 9,250 RON), and present a model which explains it in terms of partial income reporting.

The Effects of Labour Market Reforms upon Unemployment and Income Inequalities: An Agent Based Model

This paper is meant to analyse the effects of labour market structural reforms by means of an agent-based model. Building on Dosi et al. (2016b) we introduce a policy regime change characterized by a set of structural reforms on the labour market, keeping constant the structure of the capital- and consumption-good markets. Confirming a recent IMF report (Jaumotte and Buitron, 2015), the model shows how labour market structural reforms reducing workers’ bargaining power and compressing wages tend to increase (i) unemployment, (ii) functional income inequality, and (iii) personal income inequality. We further undertake a global sensitivity analysis on key variables and parameters which confirms the robustness of our findings.

Social Class and Income Inequality in the United States: Ownership, Authority, and Personal Income Distribution from 1980 to 2010.

This study outlines a theory of social class based on workplace ownership and authority relations, and it investigates the link between social class and growth in personal income inequality since the 1980s. Inequality trends are governed by changes in between-class income differences, changes in the relative size of different classes, and changes in within-class income dispersion. Data from the General Social Survey are used to investigate each of these changes in turn and to evaluate their impact on growth in inequality at the population level. Results indicate that between-class income differences grew by about 60% since the 1980s and that the relative size of different classes remained fairly stable. A formal decomposition analysis indicates that changes in the relative size of different social classes had a small dampening effect and that growth in between-class income differences had a large inflationary effect on trends in personal income inequality.

The Relationship of Normal and Excessive Personal Income Inequality with Regional Economies Performance Indicators

The Relationship of Normal and Excessive Personal Income Inequality with Regional Economies Performance Indicators

Debt-driven growth? Wealth, distribution and demand in OECD countries

The paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components. We extend the Bhaduri and Marglin (1990) model to include personal income inequality as well as asset prices and debt. This allows for an evaluation of the wage or profit-led nature of demand regimes, of the expenditure cascade argument (Frank et al. 2010) and several hypotheses regarding the effects of wealth and debt. Our estimates are based on a panel of 18 OECD countries covering the period 1980-2013. For the full panel the average demand regime is found to be wage led. We fail to find effects of personal inequality, but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis.

INCOME INEQUALITY IN THE URBAN AND RURAL SECTORS OF THE NORTHEAST REGION OF BRAZIL

In this study, we conduct an analysis of the main determinants of personal income inequality in both urban and rural areas of the Northeast region of Brazil. An earnings equation was estimated and the Shapley value was used in its decomposition. The results show that education and worker experience are the most relevant variables to explain the high index of inequality in earnings in both the rural and urban areas of the Northeast region of Brazil. Moreover, discrimination in the labor market is also an important factor to explain the concentration of income in the rural sector.

Top incomes under finance-driven capitalism, 1990–2010: power resources and regulatory orders

This article examines the impact of financialization on the income shares of the top 1% from 1990 to 2010, through a panel analysis of 14 OECD countries. Drawing together literatures stressing the dependence of income inequality on the structural bargaining power of capital relative to labour, and of the dependence of accumulation on underlying institutionalized modes of state regulation, it shows that financialization has significantly enhanced top income shares net of underlying controls. Whilst the income shares of the top 1% appear responsive to variables typical of wider studies of personal income inequality, we emphasize distinctive mechanisms of top income growth linked to the rising dominance of financial instruments and actors, facilitated by a historically specific regulatory order. These conditions were key to the emergence of a state of ‘asymmetric bargaining’ which disproportionately enhanced the fortunes of the wealthy. Results thus emphasize the importance of class-biased power resources and underlying regulatory structures, as determinants both of income concentration and of the distribution of economic rewards beyond growth capacity alone.

Personal income inequality and aggregate demand

This paper presents a theoretical and empirical investigation of how changes in the size distribution of income can affect aggregate demand and the demand regime of an economy. After presenting empirical evidence for the US economy that the propensity to save increases significantly from the bottom to the top quintile of wage earners, we demonstrate that more equal distributions always lead to higher output in the traditional neo-Kaleckian macroeconomic model. We also present conditions under which a reduction of income inequality among workers results in demand becoming more wage led. This view is supported by the results of an econometric study for the USA (1967–2010), which show that the rise after 1980 in income inequality has made the US economy more profit led.

Declining Inequality in Brazil in the 2000s: What is Hidden Behind?

AbstractEver since the late 1990s, personal income inequality has shown a steady decrease in Brazil. Most of the investigations dealing with this issue rely essentially on summary measures of inequality, which may not capture all the relevant aspects of income distribution. Using the Pesquisa Nacional por Amostra de Domicílios data for 2001–2012, this paper applies ‘relative distribution’ methods to analyse changes that have occurred along the entire Brazilian household income distribution. Despite substantial reduction in inequality, we are able to document also increasing income polarization, especially by the mid‐2000s. Similar patterns are detected for different socio‐economic groups defined by covariates measured on the households. Copyright © 2015 John Wiley & Sons, Ltd.

Personal Income Tax and Income Inequality. New Evidence from a South American Country: Ecuador 2007-2011

This paper assesses the redistributive impact of Ecuador’s personal income tax (PIT) over the 2007-2011 period. First, using individual income tax return data we compute different indicators of tax progressivity and redistributive impact (i.e. Kakwani, Suits and Reynolds-Smolensky indices) to estimate the extent to which income inequality is modified by the PIT. Second, we mobilize microsimulation techniques to assess the redistributive effect of the PIT while testing different definitions of taxable income. Third, based on the top incomes literature, we compute the effective income tax rates paid by top income groups. Finally, based on the elasticity of taxable income literature, we derive optimal income tax rates for top income groups. We find two main empirical results. First, although Ecuador’s PIT is highly progressive its redistributive capacity is very low because high-income individuals are more likely to reduce their taxable income through legal tax deductions than low-income individuals. Second, the effective tax rates paid by high-income individuals are relative low (e.g. 7% for the top 1% group) while optimal tax rates for top earners could be as high as 63%.