Shifts In Income Distribution Research Articles

The Impact of Digital Capabilities on Peasants’ Wage Growth: Evidence from Chinese Farmer Entrepreneurs

The gradual integration of digital technology into traditional Chinese villages has triggered a shift in income distribution from labor to capital, posing challenges to the wage growth of employed peasants. Based on the theory of empowerment, this paper explores the mechanisms of credit availability and talent loss in the interplay between digital capabilities and wage augmentation among employed peasants. This study empirically examines or validates the mechanism of digital capabilities on wage growth for employed peasants through the entropy weight method, the OLS linear model, the mediation effect model, and propensity score matching while using survey data from 490 farmer entrepreneurs as samples. The findings are as follows. (1) The digital capabilities of farmer entrepreneurs have a significant positive impact on the wage growth of employed peasants, and this result remains robust after a series of robustness checks. In terms of hierarchical effects, digital foundational capabilities > digital application capabilities > digital innovation capabilities. (2) Credit availability and talent loss mediate the relationship between digital capabilities and wage growth for employed peasants. (3) The digital capabilities of farmer entrepreneurs who are young, highly educated, and have a low family-dependency ratio exert a more pronounced influence on the wage growth of employed peasants. Additionally, lower policy uncertainty enhances the effect of digital capabilities on wage growth for employed peasants. The study uncovers the empowerment mechanism of digital advancements embedded during the entrepreneurial journey, enriches research on digital capabilities and common prosperity, and provides a feasible path for governments to formulate reasonable entrepreneurship and digital promotion policies.

The Brazilian Economic Regimes and the Possibility of a Regime Switch

ABSTRACT The Brazilian experience of economic growth with social inclusion from 2004 to 2010 contrasts with the period between 2010 and 2015, in which economic growth was lower despite of the maintenance of the income transfer policies. Based on the Kaleckian theoretical model, we analyze how changes in the economic context altered the response of each aggregate demand component to shifts in income distribution, reducing the likelihood of wage-led regimes and possibly leading to a regime switch. While relevant to explaining specific economic contexts, the possibility of regime switches has been largely overlooked by the literature so far. The empirical estimations based on a SVAR model with an estimated structural break for the period between 2003 and 2015 confirm a reduction in the likelihood of a wage-led regime and suggest that wage-led economic regimes became profit-led after the break in 2010. Thus, the higher wage share had a positive impact on the Brazilian economy, but such effect weakened when the underlying economic conditions changed.

Income inequality, the wage share, and economic growth

It has long been argued that an increase in inequality increases the rate of economic growth by increasing the share of income going to profit recipients, whose saving contributes to capital accumulation, so that growth is profit-led. A more recent tradition argues that an increase in equality and a rise in the wage share can increase growth by increasing consumption and investment demand, so that growth is wage-led. Bhaduri and Marglin and others argue, however, that even if economic activity is demand-determined, a shift in income distribution towards profits can increase output and growth. This paper examines how a reduction in inequality affects economic growth, thereby contributing to the debate on wage-led and profit-led growth and broadening it to focus on inequality rather than the profit share. It does so by reviewing and re-examining the cases in which workers save, the determinants of investment, and the open economy, three issues that have been emphasized in the literature.

Estimating the impact of minimum wages on poverty across ethnic groups in Malaysia

This paper examines the potential impacts of minimum wages on poverty alleviation in Malaysia by paying specific attention to its impacts between major ethnic groups. Our model assesses both the impacts on total incomes (and its distribution) and expenditures caused by price increases in response to higher labour costs. For all ethnic groups, results show that minimum wages lead to a reduction in poverty. Poverty reduction is mainly explained by an increase in total income rather than a shift in income distribution. Among the ethnic groups, poverty for ethnic Indians is reduced the most by increases in minimum wages compared to that of the Malays and Chinese. The differences in poverty reduction can be explained by the limitation of minimum wages to promote wages of informal workers among the Malays and Chinese. Therefore, minimum wages could be more effective as a poverty reduction tool if informal workers are covered in the scope.

Environmental quality: impact of economic growth

AbstractUsing a vertically differentiated product model, the paper aims to investigate the effects of economic growth on market provision of product quality. The quality attribute considered is the environmental friendliness of products. Economic growth is modeled as a shift in income distribution. It shows that the effect of economic growth depends on the form it takes. A growth in income that is uniform across consumers improves the cleanup levels adopted by both firms. However, a growth in income that is accompanied by changes in income inequality may result in the lowering of one of the two qualities. More specifically, if the growth in income is accompanied by increased disparities in income distribution, the quality of the (environmentally) inferior variant is reduced. This has serious implications for the poor consumers if the product has safety or health hazards. The paper suggests a regulatory measure to prevent such deterioration in the quality of the inferior variant.

The current economic crisis and international business. Can we say anything meaningful about future scenarios?

The paper starts with a list of stylized facts on economic trends in the last few decades with particular attention to international elements. A very brief analysis of the current economic crisis is then attempted. The root cause, the causa causans, of the excessive growth of the financial sector and the inevitable current crisis is identified in the lack of profitable investment opportunities in advanced capitalist systems. The short-term remedies include a shift in income distribution to increase the consumption component of effective demand; it also includes serious regulation of the financial sector at both national and international levels. In the medium to longer term governments should consider engaging in large investment projects such as alternative sources of energy, transport as well as in public services. This might help to improve conditions for profitable private sector investment, thus benefiting both the workers and the capitalists operating in the real sector at the expense of the rent-seekers. The paper then draws some inference on key elements likely to impact on futures, particularly with respect to internationalization and the two types of innovation identified in the stylized facts: organizational and technological. Inference is drawn with respect to the economic system as well as to economics as a scientific and academic field. The final discussion draws these various elements together.

Agriculture and the Rest of the Economy: Macroconnections and Policy Restraints

The economic relationships between the agricultural and nonagricultural sections have long been scrutinized, with a number of key linkages singled out - investment requirements and the macroadjustments between the two sectors that permit savings to come forth; nonagricultural demand for employment and food confronting agricultural supply response; shifts in income distribution that ensue as people move from agricultural/rural to nonagricultural/urban occupations and economic roles....

Wage–price dynamics and income distribution in a semi-structural Keynes–Goodwin model

The paper studies the role of income distribution within a medium-scale macrodynamic model built in a Keynesian and Goodwinian tradition. Combining a wage and price Phillips curve, adjustments of an inflation climate, an IS relationship determining output, Okun’s law for employment and the Taylor rule for monetary policy, a semi-structural model is obtained that incorporates the most important macroeconomic channels in a closed economy. After assessing the reasonable time series variabilities in stochastic simulations, a deeper analysis is concerned with the stabilizing and destabilizing effects of the model’s parameters, and with a structural shift in income distribution. In many details of these investigations, the distinction between a wage-led and profit-led regime becomes important.

The impact of growth and inequality on rural poverty in China

This paper analyzes the evolution of poverty in China from the late 1980s to the late 1990s, employing a version of Shapley decomposition tailored to unit-record household survey data. The changes in poverty trends are attributed to two proximate causes—income growth and shifts in income distribution. Different data sets, poverty lines, poverty measures, and equivalence scales are used to examine the robustness of the results. Potential biases arising from ignoring differential regional prices and inflation are also investigated. Notwithstanding some ambiguities in the results, it is consistently found that rural poverty increased in the second half of the 1990s and adverse distributional changes are the main cause. Journal of Comparative Economics 34 (4) (2006) 694–712.

Income Share Elasticity and Stochastic Dominance

Income share elasticity is a function π which can describe the size distribution of income (Esteban in Intern Econ Rev 27:439–444, 1986). On the other hand, the conventional density representation of the latter gives parameters of first or second order stochastic dominance (SD), widely used to describe shifts in income distribution, to which inequality measures are attached. The paper draws a link between the two, by providing conditions such that a given shift to π is equivalent to a first or second order SD shift of the distribution of income. Some applications to Lorenz rankings are also provided.

A Note on Income Share Elasticity and Stochastic Dominance

Esteban (1986) introduced the notion of income share elasticity as a function pi which can describe the size distribution of income. On the other hand, indices of first or second order stochastic dominance are widely used to describe shifts in income distribution, to which inequality measures are attached. The paper draws a link between the two, by providing conditions such that a given shift to pi is equivalent to a first or second order stochastic dominance shift of the distribution of income.

Realization and costs: reply to Goldstein

This is a reply to an article which argued that supply-side costs are solely responsible for cyclical contractions and that demand plays only a negligible role. My reply emphasizes that cyclical downturns are caused by both limited demand and rising costs. The limited demand is caused by shifts in income distribution away from workers, while the rising costs include raw material prices as well as interest rates.

Realization and costs: reply to Goldstein

This is a reply to an article which argued that supply-side costs are solely responsible for cyclical contractions and that demand plays only a negligible role. My reply emphasizes that cyclical downturns are caused by both limited demand and rising costs. The limited demand is caused by shifts in income distribution away from workers, while the rising costs include raw material prices as well as interest rates.

Social Funds in Stabilization and Adjustment Programmes: A Critique

This article evaluates the impact of the large number of Social Funds (SFs) which were introduced over the last fifteen years to offset the increase in poverty induced by adjustment. SFs have enjoyed greater visibility and financial support by the donor community than traditional social security programmes, and raised expectations about improvements in living conditions in developing countries. Notwithstanding the visibility and administrative flexibility they enjoyed, and their fairly rapid implementation, SFs played only a minor role in reducing the number of adjustment poor and chronic poor and reversing adverse shifts in income distribution. This was due to problems in funding, targeting and sequencing, and cost‐effectiveness. The article concludes that, all in all, SFs have proven to be no panacea. Many of them were formulated with the political objective of reducing domestic opposition to the adjustment process. Greater impact on poverty would have required increased resources, more permanent relief structures, improved planning and targeting and, especially, better timing in relation to the fiscal cuts entailed by macroeconomic adjustment.

Distribution, Aggregate Demand and Unemployment in OECD Countries

The primary aim of this paper is to investigate the role of income distribution in the determination of unemployment. To this end, the author develops a post-Keynesian model that shows that unemployment is effectively determined by income distribution, aggregate demand, and the inadequacy of capital equipment. The deriv ed unemployment equation is applied to ten large industrial countries o ver the period 1976-89. The empirical findings provide strong support fo r the hypothesis that shifts in income distribution and inadequacy of capital equipment are major sources of unemployment. Copyright 1993 by Royal Economic Society.

Stabilization, Destabilization, and the Popular Classes in Nicaragua, 1979-1988

The political tensions surrounding economic stabilization in revolutionary Nicaragua between 1979 and 1988 will be examined in this article. A review of the Nicaraguan case reveals that the Sandinista model of a mixed economy (presupposing at least simple reproduction of the capitalist, small producer, and state sectors) with multiclass “national unity” created a series of demands that were increasingly difficult to reconcile with defense priorities and longer-term goals for socioeconomic transformation. After 1981, access to external finance became more restrictive, the payoff horizon for investment projects began to lengthen, and destabilization intensified. Failure to assess these internal and external tensions realistically contributed to inflationary pressures and de facto shifts in income distribution, which at times undermined the consolidation of revolutionary hegemony and required reconsidering alliance strategies.

A short-period growth cycle model

SummaryGoodwin's well-known growth cycle model has been rejected by Keynesians because it fails to take product disequilibria into account and gives rise to cycles which are much longer than observable business cycles. In the present article it is shown that cycles of much shorter duration can be obtained if the Goodwin model is modified by taking reactions to product market disequilibria into account. While shifts in income distribution between wages and profits remain the cycle maker, the modifications intensify the profit squeeze (and profit recovery) and thus speed up the cyclical process.

Profitability and Unemployment.

Discussions of economic policy argue that an adequate level of profitability is a precondition for avoiding future unemployment. This book studies the rationale for this statement. The analysis is built round a simple model of the Harrod–Doman type and extends the study of fixed-price equilibria by considering a dynamic process whose major components are capital accumulation and shifts in income distribution. The Keynesian depression, characterized by a sustained lack of demand, is found to be particularly stable. Lack of productive capacity may also occur when profitability has been too low. In this case, the resulting unemployment stimulates corrective shifts of prices and wages. However, such unemployment may last for some time and is more likely to be followed by Keynesian unemployment than by inflationary full employment. The first and last chapters consider the problem in less formal but more general terms. They discuss both the methodology for the study of the relationship between profitability and unemployment, and the role of various factors that the simple model neglects.

Income Distributional Effects of the California Land Conservation Act

AbstractThe distribution of program benefits of California's use‐value assessment program has been a major issue in the political debate concerning the program's desirability. This study examines the income distributional effects of program benefits for a sample of participants in Sacramento County. The fraction of benefits received by lower income landowners was quite large when compared with their share of total income. Benefits received by lower income farmers were sufficient to cause a significant positive shift in farm income distribution, as measured by the Gini coefficient. For nonfarmers, the shift in the income distribution was slight.

Issues in Distribution Theory: The Measurement of Labor's Relative Share, 1899-1929

IT is a commonplace that inadequate and incomplete data prevent a precise quantitative statement of the secular trend of functional income shares generated by the United States economy. Nevertheless, approximations are possible, and it is on the basis of an approximation that investigators such as I. B. Kravis,' and D. G. Johnson,2 have concluded that labor's relative share in national income has been increasing since the beginning of the twentieth century.3 With this trend as a premise, the fascinating task of explanation presents itself, replete with opportunities for elegant theorizing. Efforts in this direction have already been made by Kravis and Johnson, as well as by R. Solow,4 and M. Bronfenbrenner,5 among others. This paper seeks to stem the explanatory tide, as it were, by showing that the supposed shift in income distribution well may be an illusory one, resulting primarily from procedures and methodology, rather than from real changes in structure. The methodological framework within which the shift has been demonstrated is subject to attack on two general grounds. First, national income, as defined by Commerce, is an unsuitable base upon which to compute labor's relative share. Inconsistencies among the comDonents of this denominator render changes in the ratio's value over time misleading when applied to the structure of income distribution. Second, the empirical evidence itself has been distorted by the manner in which earlier income estimates have been reconciled with Commerce figures in order to form consistent series. While any set of reconciliations inevitably contains elements of arbitrariness, those which have been employed are arbitrary than is really necessary. The first section of this paper develops these particular criticisms in detail. In the second section, alternative data are presented which, it is believed, provide an improved and more meaningful measurement of the relative labor share, and which indicate a startling lack of change in that share between I899 and I929. This finding is based upon the ratio of employee compensation paid by domestic private business enterprises to the product generated by this sector of the economy. Coupled with S. Weintraub's demonstration of the stability of the employees' share in business gross product (Commerce concept) for I929-I957,6 these results contrast sharply with the JohnsonKravis finding that employee compensation rose from 55.0 per cent of national income for the period I900-09 to 67.I per cent for I949-57.7