Share Of Income Research Articles

Further evidence on inflation targeting and income distribution

AbstractThis paper examines the effect of inflation targeting (IT) on income distribution in a panel of 70 countries. Employing panel regressions and a variety of propensity score matching methods, we find strong evidence that incomes became more unequal in IT‐adopting countries relative to countries that did not adopt IT. Panel regressions suggest that Gini coefficients increased by 0.25%–0.57% and the share of income of the top 1% and 10% of households increased by 0.7% in IT adopter countries. Using propensity score matching methods, IT has been associated with a relative rise in Gini coefficients of about 1–2 percentage points, and a relative increase in the share of national income going to the top 1% and 10% of households by about 11–13 percentage points and 13–17 percentage points, respectively. The results are robust to changes in country sample and alternative estimation methodologies.

The impact of green finance on labor income share: Evidence from green finance reform and innovation pilot zone

Enhancing the labor income share (LIS) is essential for optimizing the income distribution structure and achieving the goals of Chinese modernization. Through the panel data of Chinese A-share listed enterprises from 2013 to 2022, we construct a multi-period difference-in-differences model to evaluate the effect of the green finance reform and innovation pilot zones (GFRIPZ) on the enterprises’ LIS and its underlying mechanisms. The research results show that: (1) The GFRIPZ significantly increased the LIS of enterprises. And this conclusion still holds after a series of robustness checks. (2) Mechanism analyses indicates that the GFRIPZ primarily enhances the LIS by alleviating enterprises’ financing constraints and increasing operating income. (3) Heterogeneity analyses reveal that, compared to the eastern China and state-owned enterprises, the income effect of GFRIPZ is stronger in the central-western China and non-state-owned enterprises.

A Schumpeterian exploration of Gini and top/bottom income shares

Abstract Data show that an increase in the Gini coefficient is associated with a falling bottom $p_{B}$ % income share and an increasing top $p_{T}$ % income share where, for example $p_{B}$ = 40 and $p_{T}$ = 1. This relationship, which we call the $X$ inequality relationship, is pervasive in the sense that it is observed in many countries, including the US, the UK, France and others. The purpose of this paper is (i) to construct a Schumpeterian growth model to explain the relationship, and (ii) to identify/quantify factors behind it via calibration of the US economy. Our model gives rise to a double-Pareto distribution of income as a result of entrant and incumbent innovations. Its advantage is that it allows us to develop iso-Gini loci and iso-income share schedules in a tractable way. Using a double-Pareto distribution as an approximation of an underlying income distribution, calibration analysis reveals that a declining business dynamism and fiscal policy changes in the past decades played a significant role in generating the $X$ inequality relationship in the US.

Explaining socioeconomic inequality in food consumption patterns among households with women of childbearing age in South Africa.

The changing food environment shifts peoples' eating behaviour toward unhealthy food, including ultra-processed food (UPF), leading to detrimental health outcomes like obesity. This study examines changes in socioeconomic inequalities in food consumption spending between 2005/06 and 2010/11 in South African households with women of childbearing age (15 to 49) (WCBA). Data come from the 2005/06 and 2010/11 Income and Expenditure Surveys. The distribution of spending according to the NOVA food classification system groupings (unprocessed or minimally processed foods, processed culinary ingredients, processed and UPF products) was analysed using standard methodologies. Changes in spending inequalities between 2005/06 and 2010/11 were assessed using the concentration index (C), while the factors explaining the changes in spending inequalities were identified using the Oaxaca decomposition approach. The Kakwani index (K) was used to assess progressivity. Results show that average real spending on all food categories, including UPF, increased between 2005/06 and 2010/11. Socioeconomic inequality in UPF consumption spending decreased (C = 0.498 in 2005/06 and C = 0.432 in 2010/11), and spending on processed foods (C = 0.248 in 2005/06 and C = 0.209 in 2010/11). Socioeconomic status, race, and urban residence contributed to overall socioeconomic inequality and changes in UPF consumption inequality between 2005/06 and 2010/11. Spending on all food categories was regressive in 2005/06 (K = -0.173 for UPF and -0.425 for processed foods) and 2010/11 (K = -0.192 for UPF and -0.418 for processed foods) because such spending comprises a larger share of poorer household's income than their wealthier counterparts. The government should address these contributors to inequality to mitigate the risks associated with UPF consumption, especially among less affluent households.

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.

EU-induced financialisation and its impact on the Greek wage share, 1999–2021

This paper examines the determinants of the income share of wage earners in the non-financial, private sectors of Greece since its introduction to the Eurozone in 1999. The main outcome of the integration of Greece into the Eurozone has been the financialisation of its economy, which has been particularly influential for households since it led to the rapid rise of household indebtedness. Building on recent research which shows that financialisation shape wage bargaining outcomes, we use quarterly data from the Eurostat and demonstrate that the relative size of the FIRE sectors and the increase in household debt have been negative drivers of the wage share in Greece over the last 22 years. Our findings also suggest that the employment-tied social benefits system and tertiary education provision have also been important determinants of workers’ income share.

Intellectual Monopoly and Income Inequality in the United States, 1948–2021: A Long-Run Analysis

Proponents of intellectual property claim that it fosters innovation and benefits companies and workers by increasing long-run growth. A growing body of literature challenges these claims by arguing that the cumulative nature of intellectual monopoly amplifies asymmetries between winners and losers. Intellectual monopolies pose disadvantages for countries, firms, consumers, and workers who struggle to maintain a leading position. Using data at the aggregate level from 1948 to 2021 in the United States, this article estimates the long-run effects of proprietary knowledge accumulation on income shares and tests the hypothesis that intellectual monopoly amplifies income inequality. The empirical evidence shows that companies in the United States transferred to wages a significant share of their profits from intellectual property. But these transfers have widened income inequality by benefiting the top 10 and top 25 percent, to the detriment of lower income brackets. Intellectual property alone can explain 23 percent of the increase in the income share of the top 10 percent in the 1948–2021 period. JEL Classification: O34, E25, C22

How do ex ante review systems improve firms' labor income shares: Empirical evidence from the fair competition review system

Enhancing the proportion of labor income is essential for reducing income disparity and attaining widespread prosperity. This study utilizes the difference-in-differences (DID) approach to examine the relationship, using data from A-share listed corporations from 2011 to 2022. The discovery demonstrates that implementing the Fair Competition Review System can significantly enhance the labor income shares for executives and ordinary employees within enterprises. Nevertheless, the Fair Competition Review System has a more significant impact on the pay share of ordinary employees compared to executives. Additionally, the favorable effects are attained by increasing profits and reducing financing expenses. Furthermore, the firm's ownership structure and the executives' shareholding have diverse mediation impacts. This paper enhances the current body of research on the factors influencing the proportion of income corporate employees receive. It also provides novel perspectives on examining the governance systems that can enhance their income share.

Policy recommendations on supporting employee financial participation

Purpose From the first PEPPER report in 1991 until this PEPPER V Report the EU has not only expanded from 12 Members States to currently 27 but also faced complex and urgent challenges. Both the financial crisis of 2008/09 and the coronavirus disease 2019 (COVID-19) pandemic 2020/21 have left their marks on “Social Europe”. Although the overall dynamic of employee financial participation (EFP) across the EU 27 is positive, EFP is declining in terms of its share of household income in the light of the concentration of capital ownership and of capital income. Along with the issue of distributive justice, other challenges, such as business succession in small and medium enterprises (SMEs) that have been on the agenda for decades, and new ones like the extension of EFP to social enterprises, are calling for action.Design/methodology/approach From the comparison of the countries, the cluster analysis and the background of the importance of legal framework and fiscal incentives, two general principles can be derived: (1) establishing EFP schemes through legislation is of primary importance as countries that provide a stable and transparent regulatory framework for EFP also show a wider implementation of EFP practices; (2) when properly designed, fiscal incentives promote the spread of EFP effectively as both countries with a long tradition of tax incentives for EFP (e.g. UK, France) and those with a more recent development (e.g. Austria) confirm.Findings It is against this background that the following policy recommendations should be read. Tax incentives should (and in most countries they actually do) target those taxes, which constitute the heaviest burden in the national taxation system. (1) Tax incentives should be provided for both employees and the employer company. (2) Even substantial tax incentives may prove inefficient when the pre-conditions for eligibility are too restrictive, complex or inflexible. (3) Some forms of tax incentives are more suitable for certain types of plans, e.g. deferred taxation for employee share ownership (ESO), capital gains tax in lieu of personal income tax for dividends and sale of shares, or tax exemptions for matching contributions for European Employee Stock Ownership Plans (ESOPs).Originality/value In light of this need for SME action and the great potential for introducing ESO in this enterprise segment, from our recommendations we emphasise in particular: Alleviating the evaluation problem in unlisted SMEs through debt-to-equity-swaps. ESO may initially take the form of an employee loan to the company, creating corporate debt, which is subsequently converted into company shares. Facilitating share transfers in privately held limited liability companies (LLCs) by ending the requisite for notarial certification (Italy and France) or limiting it to the identity of seller and buyer. ESO in SMEs via intermediary entities, e.g. trusts, foundations, LLCs or other special purpose vehicle (SPVs) to hold and administer employee shares (AT, IE, UK, HU, FR, SI, USA).

Defence Spending and Income Inequality. An Asymmetric Empirical Evidence from a Decomposition Analysis of Defence Spending in the Case of Greece

ABSTRACT This study is the first to empirically examine the asymmetric and compositional effects of defence spending on three different measures of income disparity. Using the Nonlinear Autoregressive Distributed Lag (NARDL) approach, the study analyses the short- and long-term impacts of disaggregated defence spending on income inequality in Greece. The findings have significant theoretical and policy implications. First, in the medium term, increased military spending in Greece widens income disparity by boosting the income share of the wealthiest. Second, in the long term, positive changes in military expenditures reduce income inequality, primarily benefiting lower-income groups. Third, long-term negative changes in defence spending harm middle- and low-income groups. Finally, the compositional analysis highlights that increases in military spending, mostly on personnel and, to a lesser extent, on equipment, improve long-term income equality, while decreases in spending on personnel significantly worsen income disparity. Given these findings and the evolving nature of warfare, Greece should gradually adopt a new defence strategy. This strategy should emphasise extensive personnel reserves, prioritise domestic military equipment over costly foreign alternatives, and rationalise defence expenditures by reallocating budget expenditures towards health, education, and social welfare programs. These measures would enhance living standards and reduce income inequality in Greece.

Does Capital Market Liberalization Increase Corporate Labor Income Share? Evidence from China

Labor income share is crucial for maintaining social stability and promoting sustainable economic development, capturing the attention of both academics and policymakers. Existing studies focus on the impact of industry transformation and corporate operation on labor income share. Based on the Shanghai–Shenzhen–Hong Kong Stock Connect policy, this study identifies the causal effect of capital market liberalization on corporate labor income share in China. The results show that capital market liberalization enhances labor income share by optimizing human capital, improving corporate governance, and promoting market competition. The results provide essential implications for advancing income distribution and optimizing the structure of China’s capital market.

Big data development and labor income share: Evidence from China's national big data comprehensive pilot zones

In the midst of the rapid development of the digital economy, data has emerged as a new core production factor. It not only creates value for producers but also benefits the majority of ordinary workers, playing a crucial role in optimizing income distribution and promoting common prosperity. Utilizing data from Chinese A-share listed companies from 2012 to 2021, this study evaluates the impact of big data development on the labor income share of enterprises, employing the establishment of China's national big data comprehensive pilot zones as a quasi-natural experiment. Additionally, it examines the heterogeneity of this impact across regional, industry, and firm levels. The findings reveal that big data development significantly increases the labor income share of firms, mainly through mitigating labor mismatch, improving innovation capability, and upgrading human capital. Heterogeneity analysis shows that big data development exerts a stronger effect on eastern and labor-rich regions, high-tech and non-labor-intensive industries, big-data industries and low-competition industries, as well as state-owned and mature enterprises. This study provides policy insights on fully harnessing the benefits of big data pilot policy to increase labor income share, with important implications for developing countries.

Public Healthcare Spending, Business Dynamism, and Wage Inequality: Evidence from Developed and Developing Economies

AbstractThis paper examines the effects of public healthcare spending on wage inequality and social welfare in an economy with rural and urban regions. The objectives are twofold. First, we introduce a simple theoretical framework that captures the link between public healthcare spending and firms' output choice and subsequent wage provisions. We demonstrate that in the short run, a rise in public healthcare services can increase urban output and lower urban unemployment and raise both skilled and unskilled wage rates. In the long run, firm entry produces a business‐dynamism effect that enhances the rate of return on capital, reduces the unskilled wage rate and intensifies wage inequality. Second, we empirically test our theoretical predictions using data from 112 economies in the period 2006–2018. We find evidence supporting our theoretical findings concerning the effects of public healthcare on wage outcomes, especially in the long run. Results are highly consistent across the two groups: advanced economies (mainly OECD/European economies), and emerging and developing economies based on alternative measures for wage inequality, including the GINI coefficient and top income share. The paper provides useful information for the public healthcare policy.

A political economy analysis of the income inequality-CO2 emissions nexus in Canada

ABSTRACT Our study investigates the association between income inequality and carbon dioxide (CO2) emissions in Canada, using data from 1981 to 2021. We employ the autoregressive distributed lag bounds testing approach to cointegration. The central finding is a positive long-run cointegrating relationship between changes in the share of income of the top 1% and changes in CO2 emissions. Specifically, a 1% increase in the share of income of the top 1% is associated with a 0.07% increase in CO2 emissions. This finding, which aligns with the political economy argument and the Veblen effect, has significant policy implications. One is that it underscores the importance of considering income redistribution in the context of addressing environmental degradation in Canada.

Lau v. Nichols revisited: unveiling dual language program disparities in California for Asian students and marginalized communities

AbstractCalifornia has witnessed substantial growth in multilingual programs over the past half-century since the foundational Lau v. Nichols decision, with one in seven public schools statewide offering such programs for students. Likewise, the rapid rise in California’s Asian population, as well as the increase in both overall racial diversity and socioeconomic disparities across the state, have influenced dual language bilingual education discussions. Commemorating the fiftieth anniversary of the Lau decision, this study examines the impact of school and community characteristics on the availability of dual language programs in California public schools, with particular focus on the state’s Asian student population. Employing logistic regression analysis to delve into the American Community Survey and California Department of Education datasets, the study specifically examines how student demographics and school characteristics (e.g., grade level, charter, and magnet status), as well as community features (e.g., the share of foreign-born populations and median household income), are associated with the offering of dual language programs in California schools. Despite the considerable growth of the state’s Asian American population, the study could not find a meaningful connection between Asian representation and the provision of dual language programs. In addition, the results reveal severe equity concerns regarding low-income students’ access to dual language programs. Charter schools also tend to underutilize dual language programs compared to their non-charter counterparts. Based on the study’s findings, we raise concerns regarding why the presence of Asian students cannot be better leveraged as a driving force for implementing dual language programs in California’s public schools and highlight the persistent disparities faced by economically disadvantaged students.

Demographic change, secular stagnation, and inequality: automation as a blessing?

Abstract We study whether the increased adoption of available automation technologies allows economies to avoid the negative effect of aging on per capita output. We develop a quantitative theory in which firms choose to which extent they automate in response to a declining workforce and rising old-age dependency. An important element in our model is the integration of two capital types: automation capital that acts as a substitute to human labor, and traditional capital that is a complement to labor. Empirically, our model's predictions largely match data regarding automation (robotization) density across OECD countries. Simulating the model, we find that aging-induced automation only partially compensates the negative growth effect of aging in the absence of technical progress in automation technology. One reason is that automated tasks are no perfect substitutes for non-automated tasks. A second reason is that automation raises the interest rate and thus inhibits positive behavioral reactions to aging (later retirement and investment in human capital). Moreover, increased automation generates a falling net labor share of income and rising welfare inequality. We evaluate alternative policy responses to cope with this inequality.

Broadband infrastructure expansion and labour income share: micro-evidence from Chinese industrial enterprises

ABSTRACT This study investigates the impact of broadband infrastructure on the labour share. We exploit the implementation of the ‘Broadband China Strategy’ (BCS) as an exogenous policy shock and use the staggered difference-in-differences framework with a panel dataset of Chinese industrial enterprises spanning 2011–2015. We find that the BCS leads to a significant reduction in the labour income share of firms in pilot cities compared with those in non-pilot cities, which remains robust after conducting various robustness checks. Rising market power and deepening capital are the two mechanisms underlying this effect. While our further analysis underscores significantly positive impact of broadband infrastructure on firm productivity and skilled labour structure, they do not highlight an elevated skill premium tied to broadband infrastructure. Heterogeneity analysis reveals that the effects are more pronounced among larger firms, industries with higher concentrations, and cities with higher innovation capacities. Overall, this study augments the existing literature on the firm-level determinants of labour share, providing a micro-level assessment of the labour market implications of broadband infrastructure.

Party organization embedding and enterprise labor income share

This study investigates how party organization embedding affects the share of labor income in enterprises. It looks at party organization embedding from two perspectives: structural embedding and relational embedding. The study finds that party organization embedding boosts the share of labor income, with enterprise greening transformation and financing constraints playing a mediating role. The study's conclusions remain valid even after robustness and endogeneity tests. Additionally, there are differences in the impact of party organization embedding on labor income share across enterprises in different regions. The effect of party organization embedding on labor income share is more significant in the western region, and party organization embedding has a more pronounced impact on labor income share in less market-oriented environments.

The impact of financial technology on employment: Protection or disruption?

This study examines the impact and underlying mechanisms of financial technology (FinTech) on corporate labor demand by utilizing microdata from Chinese listed companies between 2011 and 2019. The results indicate that FinTech significantly enhances firms' overall labor demand and demand for skilled labor. Mechanistic analysis reveals that FinTech alleviates firms' financing constraints, increasing research and development (R&D) investments, which subsequently stimulates labor demand. Heterogeneity tests have revealed that the impact of FinTech on firms' labor demand varies depending on their stage of growth, ownership attributes, and level of financial development in the regions in which they are located. Furthermore, we reveal that FinTech can concurrently increase labor demand for workers with varying skill levels and educational backgrounds and increase the share of labor income. We provide new insights with theoretical and practical implications for studying the intrinsic linkages between financial and labor markets.

Multi-attribute approach for selection of polymeric materials for manufacturing gears: A case study in the automotive industry

Automotive industry is characterized by mass production, a large share in the gross national income and high employment of workers with different knowledge and skills. Improving the production process, as well as product quality, is one of the most important tasks of automotive enterprise as well as government management. This research promotes a new fuzzy hybrid model for determining the priority of polymeric materials for manufacturing gears in an exact manner, which leads to an incremental improvement in the quality of the considered product. The analysis of polymeric materials and their characteristic is based on data from the relevant literature and experiences of the best practice. The relative importance of material characteristics is stated as fuzzy group decision making problem. The weights vector is determined by using the fuzzy Analytic Hierarchical Process and fuzzy geometric mean. The rank of polymeric materials is obtained by employing the proposed Technique for Order Preference by Similarity to Ideal Solution with triangular fuzzy numbers. The fuzzy algebra rules have been used for determining: (i) distances from Fuzzy Positive Ideal Solutions and Fuzzy Negative Ideal Solutions and (ii) closeness coefficient values. The proposed fuzzy hybrid model testing and verification are performed on real data in an automotive enterprise.