Sources Of Income Inequality Research Articles

Household Debt and Housing: Source of Income Inequality in South Korea

ABSTRACT This study uncovers that the rising incidence of household debt, particularly being used for acquiring non-financial assets, correlates with a notable increase in income, predominantly benefitting high-income households. This trend is especially relevant in South Korea, where a significant portion of household debt is driven by the acquisition of non-financial assets such as houses. However, in the context of existing loan regulations, which prioritise macroprudential stability, the capacity to accrue substantial debt for non-financial assets is largely limited to high-income households. Consequently, this pattern aggravates income inequality as the analysis reveals that higher household debt balances are linked to positive income effects which are mostly available only to high-income households.

Estimation of inequality of opportunities across countries: a multidimensional approach

The study is an attempt to estimate inequality of opportunities across the countries of the world. We have developed six indices of inequality of opportunities. Each index measures the degree of inequality of opportunities in a particular dimension. Our results show that nature, extent and sources of income inequality are different in different countries of the world. In order to cope with the issue of inequality of opportunities, every country needs to adopt suitable policies depending upon its own context.

Not all luck is created equal: Sources of income inequality and willingness to redistribute

Despite steadily rising inequality in the US over the last few decades, demand for increasing tax rates and redistribution has not increased. A growing literature argues that one reason for this is that people might perceive inequality to be fair. This literature has documented that Americans tend to perceive economic inequality stemming from merit as being fair and inequality stemming from luck as unfair. However, “lucky breaks” in the real world do not necessarily come from a lottery or random chance but from the actions of the government favoring a “lucky” few. People might be more willing to redistribute if it compensates those negatively affected by government action. Using an online experiment we show that luck stemming from the action of a government-like actor influences individuals’ desire to redistribute earnings making them more likely to favor redistribution than in instances where inequality is caused by merit or by random luck.

Identity breeds inequality: Evidence from a laboratory experiment on redistribution

Politics is increasingly driven by identity cleavages, which also affect the discussion about inequality and redistribution. Typically, redistribution is meant to reduce inequality, implying that redistribution neither makes the rich richer nor the former poor the new rich. However, if identity affects redistribution, these limits might no longer be binding, and redistribution could further increase existing inequalities (making the rich richer) or reverse the income ordering to favor the once-poor (which can even be inequality increasing if redistribution is strong). In a laboratory experiment, we investigate redistribution via a novel smooth one-dimensional distribution mechanism that also allows for an increase or reversal of inequality. Decision-makers receive information about the recipients' political orientation, nationality, or seat number during the experiment, and we vary the structure and source of income inequality (income is either earned, random, or unfair). We find most choices of the decision-makers involve redistribution, with only 8 % of choices sticking with the status quo. While most redistribution choices reduce inequality, a larger share—(18 %)—increase inequality by making the rich richer, 13 % of choices reduce overall inequality but make the poor the new rich, and 9 % increase inequality by making the poor very rich. Thus, 40 % of decisions are redistributions that are typically unobserved in common redistribution designs. Ingroup favoritism is a strong motive for redistribution in general, and it is the most important motive for redistribution to increase or reverse inequality. Indeed, 85 % of the inequality-increasing or reversing decisions favor the ingroup. Complementary eye-tracking data show that decision-makers’ attention to information about the recipients’ groups and to poor outliers are related to higher levels of redistribution.

Sources of Income Inequality among Rural Farm Households in North Western Himalayas

Study assesses the inequality arising from variations of economic opportunities across different agro-climatic zones of Himachal Pradesh. The poor in the state tends to diversify their income portfolio towards wages and salaries. Income from wages and salaries is most equally distributed, yet it contributes maximum (43.63%) in total inequality. The high Gini correlation of wages and salaries with total income (R =0.597), showing that households which are above in the total income stratum derive more income from wages and salaries activities, also k contributed its share (43.63%) in total inequality. Wages and salaries and livestock inequalities are increasing in its effect; other factors remaining constant. One per cent increase in income from wages and salaries and livestock, increased total inequality by 0.115 and 0.140 per cent. The income from agriculture and livestock tend to significantly reduce income inequality in the state. However, agriculture is the major income source across all Zones showed a wide disparity among the share of other sources in the total income. Income of households was more unevenly distributed in the Zone-II, and Gini index for the Zone-II (G =0.231) was higher than that of the Zone-IV, Zone-III and Zone-I of k the state. The result of the Theil index emphasized within group inequality was the key contributor to overall disparity across agro-climatic zones. Therefore, Policy intervention at zonal level would be imperative for correcting spatial imbalances in income distribution among agricultural households of Himachal Pradesh, and would cover the way for their comprehensive and more unbiased development.

A Survey on Income Inequality in China

After China’s recent great success in eliminating absolute poverty, addressing relative income inequality becomes a more important issue. This survey finds that income inequality rapidly increased in the first three decades since 1978 but stabilized and slightly declined in the past decade, consistent with the well-known Kuznets hypothesis. In addition to documenting the trend and patterns over time and across groups and regions, seven sources of income inequality are systematically discussed with an effort to reconcile and extend the existing literature. Furthermore, a negative correlation is documented between income inequality and intergenerational mobility, consistent with the Great Gatsby curve observed in developed countries. (JEL D31, D63, O15, P36)

Redistribution and beliefs about the source of income inequality

Previous literature demonstrates that beliefs about the determinants of income inequality play a major role in individual support for income redistribution. This study investigates how people form beliefs regarding the extent to which work versus luck determines income inequality. Specifically, I examine whether people form self-serving beliefs to justify supporting personally advantageous redistributive policies. I use a laboratory experiment where I directly measure beliefs and manipulate the incentives to engage in self-deception. I first replicate earlier results demonstrating that (1) people attribute income inequality to work when they receive a high income and to luck when they receive a low income and (2) their beliefs about the source of income inequality influence their preferences over redistributive policies. However, I do not find that people’s beliefs about the causes of income inequality are further influenced by self-serving motivations based on a desire to justify favorable redistributive policies. I conclude that, in my experiment, self-serving beliefs about the causes of income inequality are driven primarily by overconfidence and self-image concerns and not to justify favorable redistributive policies.

Review Article on Determinant of Income Inequality: An Evidence Based Approach

Income inequality is a situation in which there are differences in income and wealth within the country, region, small group of society and individuals. According to bigesten the main reason is that the distribution of income is the final result of the entire economic process. The classical period was characterized by focusing only on the functional distribution. For Marx, the distribution between capital and labour and thereby between capitalists and workers played a decisive role: it is the basis of the capitalist system of production. For both Ricardo and Marx, sources of income flows relate exactly to their social classes; i.e. landlords receive rent, capitalists receive profits and workers receive wages. According to Marx (1887), the value of each commodity is determined by the labour contained in it, measured in time. Since labour power is also regarded as a commodity, its value is determined by the time necessary for its reproduction and therefore rests on a subsistence level that enables the worker to maintain his work. Workers only possess their labour power and the capitalists own the means of production. Marx’s conclude that the source of income inequality is capitalist system.

Self-employment as a source of income inequality

It is well known that the self-employed are over-represented at the bottom as well as the top of the income distribution. This paper shifts the focus from the income situation of the self-employed to the distributive effects of a change in self-employment rates. With representative German data and unconditional quantile regression analysis we show that an increase in the proportion of self-employed individuals in the labor force increases income polarization by tearing down floors at the bottom and allowing higher income potentials at the very top of the hourly income distribution. Recentered influence function regression of inequality measures corroborate that self-employment is a source of income inequality in the labor market.

Revisiting income inequality in rural China: a decomposition by regression approach

This study aims to investigate the sources of income inequality in rural China. The regression-based decomposition approach is employed to measure the relative contribution of each determinant to net income of rural residents in China. The analysis is based on a unique database of financial development compiled at the county level. This study contributes to the literature on income inequality in China by filling a gap in existing literature which is based mainly on provincial and survey data. The results clearly reveal that financial development, industrialization, the development of the tertiary sector and employment are important income determinants and contributors of intercounty inequality in rural China. The findings may provide valuable information for combating inequality in the years ahead.

Distributional change, income mobility and pro-poor growth: evidence from India

The study of income inequality and income mobility has been central to understanding India’s recent economic development. This paper, based on the first two waves of the India Human Development survey data, addresses three questions namely; (a) examining recent trends and sources of income inequality and their sources in rural and urban India, (b) whether households belonging to different socio-occupational groups have grown together and thereby factors relating to dynamic income distribution and finally (c) provides an analytical framework within which changes in income inequality over time are related to the extent to which income growth is pro-poor and to the extent of income reranking or mobility. Our results show the equalizing effect of progressive income growth was more than offset by the disequalising effect of reranking in India during the study period resulting in income inequality both in the rural and urban area.

The Effect of Self-Employment on Income Inequality

It is well known that the self-employed are over-represented at the bottom as well as the top of the income distribution. This paper shifts the focus from the income situation of the self-employed to the distributive effects of a change in self-employment rates. With representative German data and unconditional quantile regression analysis we show that an increase in the proportion of self-employed individuals in the labor force increases income polarization by tearing down floors at the bottom and allowing higher earnings potentials at the very top of the hourly income distribution. Recentered influence function regression of inequality measures corroborate that self-employment is a source of income inequality in the labor market.

What lies behind income inequality and income mobility in India? Implications and the way forward

PurposeThe purpose of this paper is to examine income inequality and income mobility, which have been central to understanding India’s recent economic development.Design/methodology/approachThis paper uses the first two waves of the India Human Development Survey data for the year 2004–2005 and 2011–2012 to analyze income inequality and income mobility using longitudinal data, and is the first to do so at a nationally representative level. In this research paper, we address three related research questions: How have been the patterns of income mobility in India? What are the trends, levels and sources of income inequality in India? and finally And What is the structure of household income mobility?FindingsThe paper examines the trends, levels, sources and factors of income inequality and income mobility in India between 2005 and 2012. The results further show the case for high persistence at the top of income distribution but lower persistence at the bottom.Research limitations/implicationsBecause of the chosen research approach, the research results may lack spatial analysis. Therefore, researchers are encouraged to test the proposed propositions further.Practical implicationsThe paper suggests that, in the end, the nature of longer-term well-being is crucial to designing policy interventions to effectively tackle inequality, and economic mobility can be seen as an avenue to long-term equality.Social implicationsThis study can further be extended to look at polarization issues at the national and sub-national levels.Originality/valueThis paper shows the analytical framework of additive decomposition of income mobility out of two sources, namely mobility due to the transfer of income within given structure and mobility due to economic growth or contraction in rural and urban India.

Men’s and Women’s Marriage and Cohabitation Earnings Gaps in Comparative Perspective

In the United States, marriage has been found to provide a “pay-off” for men’s earnings, but there is a scarcity of comparative research to put these findings in context. For women, even less is known regarding the link between marital status and earnings. This study provides insights into whether the financial benefits associated with men’s relationships are universal cross-nationally and extend to women. Using data from the Luxembourg Income Study (LIS) we find that marriage and cohabitation earnings premiums for men are common, even when individual characteristics are controlled. For women, there are few differences, especially once individual characteristics are taken into account. This study uses propensity matching to adjust earnings gaps for selection into marriage and shows that selection explains most, but not all of the earnings differences. Our findings suggest a need for additional research concerning the context of marriage as a source of income inequality in comparative perspective.

Household Income Inequality and Income Mobility: Implications Towards Equalizing Longer-Term Incomes in India

ABSTRACTThis paper addresses three important questions. First, what are the trends, levels and sources of income inequality in India? Second, how have been the patterns of income mobility? And finally, exploring the relationship between income mobility and income inequality in the context of India. Results, based on recent India Human Development Survey (IHDS) longitudinal data, advocate that not only is income inequality very high, nonetheless, it has increased – mainly attributable to different income sources – in India. The paper also focused on whether or not this income mobility equalizes longer-term incomes. Results suggest income mobility has resulted in-albeit not robust- equalizing longer-term incomes. Thus, based on imperative findings, the paper suggests, the nature of longer-term well-being is crucial to designing policy interventions to effectively tackle inequality and in this context, economic mobility can be seen as an avenue to long-term equality.

Household Economic Inequality in Australia

We use data from the Household Expenditure Survey and Household, Income and Labour Dynamics in Australia Survey to document facts about consumption and income inequality among households in Australia, emphasising the role of the rents imputed to home owners for conclusions about inequality. Consistent with other developed economies, consumption inequality in Australia is lower on average than income inequality. Both have increased since the early 1990s, with income inequality increasing by more. We decompose the trend in income inequality into four components: (i) changes in observed household characteristics; (ii) changes in the returns to unobserved skills; (iii) changes in the size of persistent income shocks; and (iv) changes in the size of transitory income shocks. We find that changes in the size of persistent and transitory income shocks, rather than changes in observed household characteristics, explain most of this trend. Since the middle of the 2000s, the source of income inequality has shifted from transitory to persistent factors, which is consistent with the rise in consumption inequality over the corresponding period. We find that accounting for imputed rents lowers estimates of the level of inequality in Australia, but has a negligible effect on the trends.

Entrepreneurship and income inequality

Entrepreneurship research highlights entrepreneurship as a simultaneous source of enhanced income mobility for some but a potential source of poverty for others. Research on inequality has furthered new types of models to decompose and problematize various sources of income inequality, but attention to entrepreneurship as an increasingly prevalent occupational choice in these models remains scant. This paper seeks to bridge these two literatures using regression-based income decomposition among entrepreneurs and paid workers distinguishing between self-employed (SE) and incorporated self-employed (ISE) individuals in Sweden. We find that the proportion of self-employed in the workforce increases income dispersion by way of widening the bottom end of the distribution, whereas the proportion of incorporated self-employed contributes to income dispersion at the top end of the distribution. Implications for research are discussed.

English

English

Sources of Income Inequality among Households 65 and Older: Can Individual Choice, Markets and Public Policy Increase Equality?

This paper explores the sources of income inequality among households aged 65 and older and the extent to which individual actions, competitive markets, and public policy can improve the financial well-being of those with low income. Three different types of retirement wealth are identified on the basis that they 1) are acquired in very different ways; 2) vary in their contribution to income inequality among older households; and 3) require unique individual behaviors and public policies to increase the income that they generate. Continued labor force participation is the most effective way to increase income in retirement but opportunities offered by the labor market favor highly skilled people and are likely to increase income inequality. Income inequality is likely to be a continuing reality for households of retirement age.

Regional segregation or industrial monopoly? Dual labor market segmentation and income inequality in China

Using data from the 2010 China Family Panel Study and county- and industry-level statistics, we estimate cross-classified multilevel models to examine the determinants of the income gap among Chinese workers. Results show that both regional and industrial differences are important sources of income inequality in China. Taken together, they account for about one fifth of the total variation in individual income. Among them, differences in county explains 7%, while difference in industry accounts for 14% of the total variation. Further analyses demonstrate that county- and industry-level variables have significant independent effects on individual income even after controlling for individual socio-demographic characteristics and human capital resources. We also explore the potential mechanisms through which macro-level factors function in widening income gaps among Chinese workers. Our results show industrial monopolies have been a key driver of the elevated income inequality in China.