Income Redistribution Research Articles

Related party transactions, ownership structures and cost of debt: evidence from GCC listed firms

PurposeThis study aims to investigate the relation between firms’ use of related party transactions (RPTs) and cost of debt (COD) in Gulf Cooperation Council (GCC) countries.Design/methodology/approachThe authors obtain data from annual reports and the Standard and Poor’s Capital IQ database over the period 2005–2016 period of nonfinancial publicly listed firms on the UAE, KSA, Oman, Bahrain, Kuwait and Qatar stock exchanges. Using a final sample of 1,810 firm-year observations, the authors empirically assess the relation between strategic use of RPTs, the COD issuance and the moderating effects of governance mechanisms.FindingsThe authors find that high levels of total RPTs and purchase-based RPTs increase firms’ COD. Furthermore, propping of sales through increased sale-based RPTs is found not to have a significant effect on firms’ COD. The authors also find that ownership factors pertaining to family member founding and royal family ownership negatively moderate the association between the firm’s RPTs and COD. Additionally, the voluntary formation of executive committees has a positive and significant mediating effect on the relation between firms’ purchase-based RPTs and COD. The results are robust to several additional tests and alternative measurement specifications.Research limitations/implicationsThe positive relationship between purchase-based RPTs and firm financing costs is magnified in countries with high quality of RPT disclosures. This has implications for funding of GCC entities by governments and financial institutions.Originality/valueTo the best of the authors’ knowledge, this study is the first to examine how wealth transfer via RPTs in the GCC region is associated with higher COD. The authors also contribute to the outcome of emerging governance regimes in the GCC, which could impact the level of credit risk and/or default risk faced by a firm and, thus, the relation between RPTs and COD. In doing so, the authors provide a more nuanced study by investigating the potential channels that could account for such a relation in an emerging market setting.

Reimagining education and community mobilization in China’s migrant communities: towards an ‘Asia as method’ framework

This article engages in theoretical reflection on how to transcend the imposition of Eurocentric theories onto Southern and Eastern examples. Specifically, I reflect on the examination of educational issues faced by marginalized migrant communities within Chinese contexts and explore the application of an “Asia as Method” conceptual framework to reimagine education opportunities for migrant children and community mobilization as it pertains to a politics of recognition and redistribution. The politics of location and identity shaped by Chinese society’s historical and contemporary power structures highlight both the needs and potential of theoretical conceptualizations from within. The goal is not simply to replace the West/North with the East/South nor is it to generate a wholly new theoretical concept to be applicable to all contexts; instead, the task undertaken in this work is to foster historically grounded relational explanations in order for communities in previously-decentered contexts to become one another’s multifaceted reference points.

Trustee powers—observations from Australia

Abstract Much of the current and future intergenerational wealth transfers in Australia is and will be through discretionary family trust structures and testamentary trusts. The number of disputes in relation to the administration of these trusts will very likely increase. This article provides a general overview of some specific aspects of trust administration and trustee powers and obligations in Australia, including adding and removing beneficiaries, decanting trust assets, provision of information to beneficiaries, fettering of discretions and avoiding or resolving disputes in relation to the exercise of those powers.

Intergenerational transmission of luck versus effort beliefs

Beliefs about whether luck or effort determines individuals’ economic outcomes in life (luck vs effort beliefs) are central for individuals’ opinions on inequality and political preferences. Those who think that luck is relatively more important than effort generally accept less inequality, want more economic redistribution and support a larger welfare state. We study the transmission of luck vs effort beliefs from parents to children. By means of an original, representative survey of Swedish parents, matched to administrative data, we document that the vast majority teach their children not only that effort is crucial for economic success, but that effort is more important than what they themselves actually believe it to be.

Financial risk protection in private health insurance: empirical evidence on catastrophic and impoverishing spending from Germany's dual insurance system.

Financial risk protection from high costs for care is a main goal of health systems. Health system characteristics typically associated with universal health coverage and financial risk protection, such as financial redistribution between insureds, are inherent to, e.g. social health insurance (SHI) but missing in private health insurance (PHI). This study provides evidence on financial protection in PHI for the case of Germany's dual insurance system of PHI and SHI, where PHI covers 11% of the population. Linked survey and claims data of PHI insureds (n = 3105) and population-wide household budget data (n = 42,226) are used to compute the prevalence of catastrophic health expenditures (CHE), i.e. the share of households whose out-of-pocket payments either exceed 40% of their capacity-to-pay or push them (further) into poverty. Despite comparatively high out-of-pocket payments, CHE is low in German PHI. It only affects the poor. Key to low financial burden seems to be the restriction of PHI to a small, overall wealthy group. Protection for the worse-off is provided through special mandatorily offered tariffs. In sum, Germany's dual health insurance system provides close-to-universal coverage. Future studies should further investigate the effect of premiums on financial burden, especially when linked to utilisation.

INCOME INEQUALITY, CLIENTELISM AND GOVERNANCE: IMPLICATIONS FOR SOCIOECONOMIC DEVELOPMENT IN WEST AFRICA.

Genuine redistribution of income is usually not commonplace in underdeveloped democracies. Instead, politicians in these democracies often target private, excludable and reversible benefits at the poor in exchange for electoral support. This electoral strategy often results in a situation where maintenance of political power or re-election becomes the focus of public policies instead of public welfare. This study investigated the main and interaction effects of income inequality and clientelism on government effectiveness in West African Countries from 1996 to 2020. The study objectives were achieved using pooled mean group (PMG) approach of the panel autoregressive distributed lag (ARDL) estimation technique and the Dumitrescu Hurlin panel causality test. Findings from the study revealed that clientelism enhances government effectiveness at higher levels of income inequality but inhibits government effectiveness at lower levels income inequality. The study findings also revealed positive relationship and uni-directional causality between income inequality and clientelism. The study concluded that government effectiveness which thrives on lower levels of income inequality and clientelism is beneficial to socioeconomic development; and that socioeconomic development and government effectiveness is interdependent and mutually reinforcing.

Production Efficiency and Income Distribution with Competition Induced by Antitrust Measures

We use a three-sector overlapping generations model to examine the efficiency characteristics and income distribution in the long-run steady-state equilibrium. Assuming two sectors produce intermediate goods within an oligopolistic competition, we explore the implications for production efficiency and income distribution, given an increase in competition induced by antitrust measures. Our analysis presents the possibility of steady-state welfare under imperfect competition surpassing that of perfect competition when declining competition leads to a redistribution of income from older to younger generations. Nevertheless, greater competition (within oligopoly competition) consistently results in a more equitable income distribution.

How Wealth Transfer Taxes Might Reduce Racial Wealth Disparity in America

How Wealth Transfer Taxes Might Reduce Racial Wealth Disparity in America

Energy price shocks, conflict inflation, and income distribution in a three-sector model

The paper presents a model of conflict inflation to investigate the distributional effects of energy price shocks. We argue that periods of high inflation are always periods of significant redistribution of income. We analyse how such redistribution occurs along two dimensions: between workers and firms and between sectors of the economy. To study the distributional outcomes of the recent inflationary episode, we build a three-sector model comprising a domestic energy sector which provides inputs for a goods and a services sector. The model is calibrated to US sectoral data with the Method of Simulated Moments. While energy prices are set internationally, non-energy prices and nominal wages are set by firms and workers, giving rise to conflicting claims over the distribution of income. We consider three shocks that trigger inflationary distributional conflict: an energy price shock combined with demand and supply shocks to the goods sector. We find that the recent inflationary episode constitutes a price-wage rather than a wage-price spiral. The combined shocks induce non-energy firms to raise prices, which undermines real wages, and redistributes income towards firms. The sectoral demand shift towards goods in combination with pandemic-related supply bottlenecks further raises mark-ups, accelerating inflation and leading to divergence in sectoral profit margins. We compare three anti-inflationary policies: redistributing windfall profits to workers, nominal wage restraint, and aggregate demand contraction through monetary or fiscal policy. The redistribution of profits via a windfall tax is most effective in reducing inflation without reinforcing reductions in employment and labour shares.

Why recognition? Deciphering justice claims in 2016 Anglophone Crisis in Cameroon

ABSTRACT Scholars attribute the 2016 Anglophone Crisis in Cameroon to systematic marginalisation of the English-speaking minority whose rights are constitutionally guaranteed but remain violated. However, marginalisation fails to explain why the peaceful-Independent Anglophone Elites (IAEs), consisting of lawyers, teachers, civil society organisations and Anglophone associations at home and abroad, who stood behind the 2016 Crisis, refused to bolster claims over economic redistribution or political representation. Instead, in 2016 they chose to engage in the struggle for self-determination and recognition of the Anglophone identity. Through Nancy Fraser's identity model and in-depth interviews with IAEs, we show that they perceived the recognition claim and a return to a federal state as a guarantee not only to the survival of the IAEs, but also to the solution of other forms of injustices, such as misrepresentation, misrecognition, and maldistribution.

Market Structure, Oligopsony Power, and Productivity

I examine the effects of oligopsony power on allocative efficiency and income redistribution by studying a size regulation in the Chinese tobacco industry that led to ownership consolidation. I show that separate identification of input price markdowns, goods price markups, and productivity is challenging when a subset of inputs is nonsubstitutable, which often holds for materials, and construct and estimate a model to overcome this challenge. I find that the regulation increased input price markdowns by 37 percent on average. This increase in oligopsony power led to a decline in allocative efficiency and redistributed income away from rural households. (JEL D24, D31, G32, G34, L13, L66, P31)

Practical Implications of The Prohibition of Gambling In Islamic Economic Principles

This article reviews the practical implications of banning gambling in Islamic economics and how this principle helps maintain economic order and social responsibility. The prohibition of gambling in Islam is based on the principles of tawhid, justice, maslahat, ta'awun, and balance. This article explains how gambling bans encourage fair economic practices, avoid exploitation, and promote wealth redistribution. In addition, the prohibition of gambling also contributes to the establishment of an ethical and socially responsible society through a more equitable distribution of income. The practical implications of this gambling ban can be seen in the implementation of Islamic economic principles, which focus on justice, economic empowerment, and the welfare of society as a whole.

INCREASE IN PRICES OF STAPLES IN THE MONTH OF RAMADAN IN THE PERSPECTIVE OF ISLAMIC ECONOMIC PHILOSOPHY

Purpose- The objective of this research is to analyze the phenomenon of the increase in prices of basic commodities during Ramadan from the perspective of Islamic economic philosophy. This study aims to understand the factors influencing price hikes, their impact on society, and to find solutions in line with the principles of Islamic economics to address the issue. Methodology- This research utilizes a qualitative and descriptive approach. Data will be collected through literature review, document analysis, and interviews with Islamic economics experts. Data analysis will be conducted using deductive and inductive approaches, while referring to relevant Islamic economic principles. Findings- Based on this study, it was found that the increase in prices of basic commodities during Ramadan can be attributed to several factors. One of the main factors is the high demand due to increased consumption during the fasting month. Additionally, other factors such as price speculation, changes in consumer behavior, and supply disruptions can also contribute to price hikes. The impact of the price increases of basic commodities during Ramadan is strongly felt by the society, particularly those with low incomes. The price hikes can lead to economic difficulties, social instability, and increased economic disparity within the community. This contradicts the principles of Islamic economics that emphasize justice, sustainability, and concern for the welfare of society. Conclusion- Based on this research, it can be concluded that the increase in prices of basic commodities during Ramadan, from the perspective of Islamic economic philosophy, is a complex issue that requires solutions aligned with the principles of Islamic economics. Potential solutions include enhancing market transparency, reducing price speculation, promoting local production, encouraging active participation of the community, and strengthening mechanisms for fair economic redistribution. Implementing Islamic economic principles such as justice, sustainability, and social welfare can help address the issue of price hikes during Ramadan and create a more stable and sustainable economy. In this context, the role of the government, Islamic financial institutions, and society at large is crucial in working together to address this problem and ensure equitable economic well-being for all segments of society. Keywords: Increase in prices, basic commodities, Ramadan, Islamic economic philosophy, price hikes JEL Codes: D40, E31, P48

THE EFFECTIVENESS OF THE DEVELOPMENT OF TERRITORIES IN THE STATE REGIONAL SYSTEM POLITICIANS

It was determined that the development of territories depends on the choice of strategy, tactics and implementation tools regional policy of the state. And therefore, at the current stage of global transformations, they are expedient and permanently improve, as current practice shows approaches to managing the development of domestic territories. Trends and prospects of development are studied in territorial units of Ukraine in terms of implementation of the chosen strategy and current state regulations and regional policy. The study of the problem was carried out thanks to the application of methods of comparison, abstraction, analysis and generalization, as well as tabular and graphical modelling. It was determined that the prospects for the development of territories primarily depend on the strategy and tactics implementation of the state regional policy, which should take into account the dynamism of socio-economic development, the rate of digitization of the economy and the level of innovation and technology regions of highly developed countries of the world, with which domestic regions are becoming more and more difficult to compete. A set of measures was proposed to optimize the processes of managing the development of territories, in particular, the creation of mechanisms for combating post-pandemic consequences, stimulating purchasing consumer demand at the local level, improvement of tax policy, creation of favourable conditions for improving the qualification level of employees, rationalization of the financial redistribution mechanism resources between different territories, as well as between regional and state budgets, dissemination of effective anti-corruption practices at the local level. Prospects for the creation of territorial ones have been determined by communities taking into account positive and negative factors to reveal strong and weaknesses in order to identify opportunities and threats to their development at the regional level levels using a SWOT analysis. Ways to improve regional policy are proposed.

THE MECHANISM OF INCOME REDISTRIBUTION AND THE REGULARITY OF THEIR FUNCTIONING

The article discusses such issues as the redistribution of incomes created in the national economy, criteria for assessing their fairness and efficiency, natural factors affecting this, and human qualities. Scientific proposals and practical recommendations were also given to ensure fairness and efficiency of the redistribution processes.

Recovering fixed costs in the presence of prosumers

The existence of prosumers who concurrently produce and consume electricity with distributed renewable resources such as photovoltaic generation has been viewed as an effective way of fortifying grid resilience and enhancing sustainability. However, prosumers’ self-consumption is impacted by how surplus electricity is priced when feeding it into the grid. From the perspective of fixed cost recovery, this study compares market outcomes when their transactions with the grid are subject to net-metering and net-billing policies considering both the wholesale and retail markets. Under the net-billing policy, prosumers may face a power price lower than the retail rate or the wholesale price when selling their surplus energy into the grid. Compared to the benchmark case, where prosumers are subject to the same price signals as conventional consumers and producers, prosumers would over-consume under the net-billing case. The net-billing policy converges to the net-metering policy when prosumers purchase power from the grid. The analysis also finds that the net-metering policy can result in more wealth transfer from conventional producers and consumers to prosumers when compared to the net-billing policy.

Luck or rights? An experiment on preferences for redistribution following inheritance of opportunity

We conducted an experiment to examine whether individuals are more likely to support the redistribution of income stemming from the inequality of inherited opportunities. Specifically, we randomly and anonymously paired two strangers in a lab setting to determine whether the source of the opportunity from the ‘testator’ subjects influences the ‘heir’ subjects’ redistributive decisions. We find that, on average, the highest level of redistribution occurs among heirs who received their winning opportunity through pure luck. This result, which is robust to controlling for personal characteristics and ex-ante transfer, supports the meritocratic fairness hypothesis, which posits that individuals generally perceive endowment generated by luck as less deserving than by effort. However, we discovered that redistribution is, on average, similar between subjects who won through their own efforts and those who won because of having inherited someone else's effort. This is in line with the ‘inheritance entitlement hypothesis’, which suggests an internalization of inheritance when the narrative of effort is passed down from the testator to the heir. Thus, our results suggest that people feel less entitled to bequests and inheritance when the randomness of inheritance is made more salient to them.

Public Investment in Social Services and Income Inequality in Nigeria

This study contributes to the body of knowledge by investigating the dynamic effects of public social services investment on income inequality in Nigeria. The motivation for this study is the controversy surrounding the effectiveness of public spending on social services in promoting economic development in developing economies. Thus, this study followed an ex-post factor research design by obtaining annual time series data from the CBN Statistical Bulletin and the National Bureau of Statistics, which were analysed with the application of the autoregressive distributed lag (ARDL) model. Evidence of mixed integration was established from the unit root test results. The series was also found to be co-integrated at the significance level of 5 percent. It was established from the findings that public spending on social services significantly reduced income inequality in the long run. This finding explains the effectiveness of social services spending in income redistribution in the long term. The results also showed that public expenditure on economic services reduced income inequality in the short run. However, total public expenditure, as a percentage of the GDP, has a negative but insignificant effect on income inequality in the long run. This finding casts doubt on the effectiveness of total public expenditure in addressing the problem of income inequality in Nigeria. Given the findings, this paper recommends that policymakers should provide a sustainable path for increased public investments in social services to the required vehicle for equitable income distribution in Nigeria.

Income is more protective against pain in more equal countries

It is empirically well-established that the rich suffer less pain on average than the poor. However, much less is known about the factors that moderate the size of the income gradient of pain. Using data from over 1 million adults from 127 countries worldwide, this article conducts a systematic test on whether income inequality moderates the pain gap between the rich and the poor. While pain is negatively associated with income in all but one country, there is strong evidence to suggest that an increase in income is much more protective against pain in countries where the income distribution is relatively more equal. The results are robust to using different measures of income inequality, removing outliers, and accounting for country and year fixed effects. We explain our results through the lens of income rank effects on health outcomes. Overall, our findings suggest that pain-reducing policies through income redistribution may need to take income inequality into consideration when evaluating their effectiveness.

Missing Participants, Missing Markets, and the Social Discount Rate: Borrowing Constraints, Intergenerational Transfers, Altruism, and the Desire for Legacy

Market interest rates reflect the preferences of market participants. When market participants are missing, the average discount rate in the population may therefore differ from the market rate. Missing current market participants, such as constrained borrowers, tends to imply an average discount rate that is above the market rate, whereas missing future market participants, such as future generations, tends to imply an average rate below the market rate. Nonetheless, a government with the ability to transfer wealth intratemporally across agents will generally wish to use the market interest rate as a guide to policy. One robust argument for the use of a lower social discount rate is intrapersonal: Future selves discount the past, whereas current selves discount the future. Legacy utility may also justify a low social discount rate.