Widening Income Inequality Research Articles

Executive compensation and worker wages during the global trade collapse: Evidence from Japanese firms

Widening income inequality is a serious social concern in many countries. We examine the causal effect of a negative demand shock on executive compensation and worker wages using a quasi-natural experiment, considering Japanese firms that experienced a sudden and substantial export decline following the global financial crisis in the late 2000s. Worker wages tended to decline significantly more relative to executive compensation after the crisis in firms depending more on exports, causing a wider pay differential. We establish the robustness of our difference-in-difference results by considering selection into exporters, excluding sporadic exporters, and controlling for foreign ownership or liquidity.

Does income inequality restrain marriage? A longitudinal study from the 35 large and medium-sized cities of China

In recent years, the continuous decline of marriage rate in Chinese cities has attracted significant attention. The study examined the impact of income inequality on marriage rates, and explored the mechanisms through which this relationship operates. Panel data of 35 large and medium-sized cities of mainland China from 2004 to 2019 were used to empirically test the theoretical hypothesis, finding the following results: Firstly, widening income inequality emerges as a crucial factor contributing to the decline in marriage rates within Chinese cities. Secondly, the impact of the income inequality on the marriage rate shows significant spatial and temporal differences in urban areas. Lastly, factors such as Internet penetration, urbanization and housing price are important channels for income inequality to affect the marriage rate. The objective of this study is to explain the decline of marriage rate in China's cities from the perspective of income distribution, and subsequently unveil the macro-level correlation between income inequality and marital behavior.

Financial deepening on income inequality: A quantitative meta-analysis study

AbstractThere exists a vast empirical literature on Financial Sector Development (FSD) and the income inequality nexus; however, it lacks consensus. To study this, 24 studies with 87 regression estimates on financial institution depth and income inequality were collected. This paper used the most common method of economic meta-analysis, the Partial Correlation Coefficient (PCC), to answer the question: What is the magnitude and impact, if any, of financial institution depth on income inequality? In addition, a multivariate meta-regression model was used to find moderator variables that produced mixed results in the literature. The results show that the global average comovement of financial institution depth (domestic credit) on income inequality is very small but positive; suggesting that growth in domestic credit may widen income inequality. The positive correlation between domestic credit and income inequality highlights how financial institutions use household income and collateral as a signal when deciding on credit applications. Finally, the multivariate regression results suggest that the present heterogeneity within the literature stems from different methodologies and control variables included in the econometric models, and panel studies that mix countries with heterogeneous characteristics. These suggest that different components of FSD may impact income inequality differently.

Market power, inequality, and financial instability

Over the last four decades, the U.S. economy has experienced a few secular trends: declining labor share, increasing profit share, widening income and wealth inequalities, rising household sector leverage and associated financial instability, manifested in an increase in the probability of financial crises. This paper provides a unifying framework for explaining these trends based on a rise in firm market power in both product and labor markets. We develop a general equilibrium model and show that the rise in firm market power over the last few decades can generate all of these secular trends.

Towards Achieving the Sustainable Development Goals (SDGs): The Impact of Debts on Income Inequality in Africa

The Agenda for Sustainable Development provides a framework for the creation of a better and sustainable future for all. The Sustainable Development Goals (SDGs) focus on addressing global challenges, including income inequality. Among others, the SDGs also commit countries to work towards reducing income inequality and as such, lowering income inequality is one of the key issues in Africa. However, given the high levels of debt on the continent, reducing income inequality could be a challenge. Majority of the literature examines the link between debts and economic growth with little attention paid to the impact of debts on income inequality. Moreover, not much is known on whether the relationship between debt and income inequality is non–linear. This study therefore contributes to the existing research efforts by investigating the threshold effects of debts using data from 24 African countries by relying on the sample splitting and threshold estimation approach. The results reveal that, while debts generally dampen income inequality, unbridled debt accumulation above the estimated thresholds does not decrease income inequality, indicating that the income inequality–reducing impact holds at lower levels of debt–to–GDP ratio. This evidence is insensitive to different indicators of income inequality and debts. Findings from this study show how increasing indebtedness contributes to widening income inequality in Africa.

Impact of income inequalities on subjective perception of older adult health: An analysis of healthy life expectancy in China from 1997 to 2006.

Driven by rapid socioeconomic development over recent decades, there are widening income inequalities and subjective health disparities among older adults in China. This study explored the relationship between income inequalities and self-rated healthy life expectancy (HLE) considering potential sex-specific differences. From a cohort of 1760 individuals aged ≥60 years from the China Health and Nutrition Survey (1997-2006), we calculated age-specific life expectancy (LE), HLE and the proportion of HLE to LE (HLE/LE) by sex using the IMaCh software, incorporated time-varying income levels of older adults. Although longevity has significantly improved, the well-being of Chinese older adults could be further enhanced by assessing HLE, as the results showed that at age 60 years, ~20% of their LE was characterized by unhealthiness. Discriminated by economic status, lower-income individuals experienced worse self-rated health compared with the general population and affluent counterparts. For instance, at age 60 years, the LE, HLE and HLE/LE of low-income men were 19.8 (95% CI 18.4-21.1), 16.2 years (95% CI 15.0-17.5) and 81.8%, respectively, lower than their general (21.7, 95% CI: 20.4-23.0; 18.0, 95% CI 16.8-19.2; and 82.9%) and high-income counterparts (25.1, 95% CI 23.1-27.2; 21.4, 95% CI 19.5-23.3; and 85.3%). Sex disparities were noticeable among low-income individuals in HLE/LE, with low-income women showing the most significant disadvantage. Income inequalities exacerbated subjective health disparities among older adults, particularly among lower-income individuals and women. Our findings carry significant implications for formulating public health and social welfare strategies, especially in nations grappling with an aging population and undergoing parallel socioeconomic development. Geriatr Gerontol Int 2024; 24: 109-115.

A growing divide: Trends in social inequalities in healthy longevity in Australia, 2001–20

This study examines two decades of change in social inequalities in life and health expectancy among older adults in Australia, one of the few countries that escaped an economic recession during the global financial crisis. We compare adults aged 45+ across three measures of individual socio-economic position—education, occupation, and household wealth—and use multistate life tables to estimate total life expectancy (TLE) and life expectancy free of limiting long-term illness (LLTI-free LE) based on 20 waves of the Household, Income and Labour Dynamics in Australia Survey (2001–20). Our findings highlight substantial social disparities in both TLE and LLTI-free LE in Australia. Grouping individuals by household wealth shows striking differentials in LLTI-free LE. We observe widening social disparities in healthy longevity over time by all three measures of socio-economic position. This diverging trend in healthy longevity is troubling against the backdrop of widening income and wealth inequalities in Australia.

IMPACT OF IMF’S EXTENDED FUND FACILITY (EFF) ON MACROECONOMICS OF PAKISTAN

The International Monetary Fund's (IMF) Extended Fund Facility (EFF) utilized by several countries including Pakistan who facing the economic challenges. This study tried to analyze the impact of the IMF's EFF program on the macroeconomics of Pakistan. The study examining the different scopes of EFF program, including its objectives, conditions, and way forward. The paper also assess its effects on the main macroeconomic indicators such as economic growth, inflation, fiscal discipline, and external sector stability. The EFF program, implemented in Pakistan during a period of economic distress, aimed to address the country's balance of payment crisis, stabilize the exchange rate, restore investor confidence, and promote sustainable economic growth. Under this program, Pakistan committed to a set of economic reforms and structural adjustments, including fiscal consolidation measures, monetary tightening, and structural reforms in key sectors such as energy and taxation. However, the implementation of the EFF program also had some adverse effects on the macroeconomics of Pakistan. The program's stringent conditions, such as fiscal austerity measures and energy tariff adjustments, contributed to a temporary slowdown in economic growth. Furthermore, the austerity measures had distributional consequences, impacting vulnerable segments of society and potentially widening income inequality.

Policy realignment and competition in attention markets

Over the past decade, a rapid shift in public attitudes towards large corporations has propelled antitrust law from obscurity to a favourite tool among progressive and conservative populists.1 Several factors account for this rise in antitrust’s political salience, one of which is the remarkable success of a new wave of anti-bigness advocates in attention markets.2 These advocates have branded themselves as 21st-century trustbusters, promoting their anti-bigness agenda as an ‘anti-monopoly movement’. They have adeptly converted their gains in attention markets into political influence and control over antitrust institutions. Their achievements have sparked both optimism and concerns that we might be witnessing an anti-monopoly realignment, with anti-bigness ideologies on the verge of reshaping antitrust policies. This essay explores the plausibility of an anti-monopoly realignment transforming antitrust law and policy. At the core of the anti-bigness movement lies the belief that failed antitrust policies have contributed to, or exacerbated, a wide range of social, economic, and political problems, resulting in ‘excessive market concentration [that] threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers’, denying the public the ‘benefits of an open economy’, and ‘widening racial, income, and wealth inequality’.3 Building on this premise, anti-bigness crusaders contend that their anti-monopoly agenda will restore competition in the American economy and reverse the trends.

A multidimensional free market and income inequality in developing Asia: How does the quality of governance matter?

AbstractThis paper empirically examines how a free market, a governance quality (GQ) and their interaction simultaneously affect income inequality in 23 Asian developing countries over the period 2000–2019. Especially, different dimensions of a free market proxied by various components of economic freedom (EF) are analysed. Results show that the overall EF and three of its components, including labour freedom, trade freedom and investment freedom, reduce income inequality; but other components, including business freedom (BF), monetary freedom (MF) and financial freedom (FF), widen income inequality. Meanwhile, the GQ not only decreases income inequality but also intensifies the beneficial impacts of the overall EF and those respective components of EF on income equality. Notably, at certain thresholds of GQ, the detrimental impacts of BF, MF and FF on income equality turn into the advantageous ones. The findings consolidate the appropriate combination of free market with specific dimensions and the GQ in boosting the equality of income distribution in Asian developing countries.

Income Inequality, Household Debt, and Consumption Growth in the United States

In this paper, the SV-TVP-VAR model is used to study the relationships between income inequality, household debt, and consumption growth in the US. This is of great significance for studying whether household debt can become a “substitute” for income and whether it is possible to achieve sustainable growth in consumption under the background of worsening income inequality. According to the research results, the main conclusions are as follows: Firstly, the widening of income inequality would increase consumption in the short term but restrain consumption in the medium and long term, as the relationship between them would turn from positive to negative. Secondly, household debt could improve consumption in the short term but reduce consumption in the medium and long term, with long-term effects being greater than medium-term effects, which means that the long-term negative impact of US household debt on household consumption would be persistent. Lastly, widening income inequality has led to rising household debt over different maturities.

The Effects of Covid 19 on Workers and Its Implications on Socio-Economic Inequalities in Ghana

Purpose: The novel coronavirus has caused havoc to the various economies throughout the world with Ghana, not an exception. The purpose of this paper is to ascertain the effects of the COVID-19 pandemic on the various institutions and sectors in Ghana particularly the effects on Ghanaian workers and its implications on inequalities in Ghana be studied. 
 Methodology: The paper adopted a qualitative research approach and used discourse analysis of secondary data obtained from sources such as journal articles, online news articles, newspaper publication and other internet sources. The study is hinged on the institutional theory.
 Findings: The findings indicated that the outbreak of the pandemic have brought negative consequences to the workers of the country. These consequences are loss of jobs, reduced income and source of livelihoods.
 Unique Contribution to Theory, Policy and Practice: The policies implemented by the government of Ghana to curtail the spread of the virus have rather exacerbated the already troubling inequality situation in the country. There is also a widening gender inequality, income and poverty inequality, employment inequality, and inequality in the access to education between the vulnerable and less vulnerable in Ghanaian society.

The impact of extreme weather events on green innovation: Which ones bring to the most harm?

This research investigates the effect of extreme weather events on green innovation by using unbalanced panel data covering 117 countries from 1971 to 2018 and documents strong evidence that extreme weather has a significantly negative impact on green innovation. We also find among the four extreme weather events such as droughts, extreme temperature, floods, and storms that floods have the most prominent adverse impact on green innovation. Furthermore, the significantly negative effect of extreme weather is manifested in countries with a high level of corruption and low level of trade openness, but not in the countries with a low level of corruption and a high level of trade openness. Lastly, we show that extreme weather events have an adverse impact on green innovation by decreasing economic growth level, hindering financial development, widening income inequality, damaging the accumulation of human capital, and increasing the political risk.

Introduction to the special issue on mobility, climate change, and economic inequality

Introduction to the special issue on mobility, climate change, and economic inequality

Why the Equalizing Effects of Democracy Do Not Work

Meltzer and Richard (1981) argued that democracy mitigates income inequality through redistribution if democracy gives more people the right to vote, regardless of income level, and if the political system reflects the interests of the lower-income class earning below median income. According to the Meltzer and Richard model, the spread of democracy globally over the past 40 years should have lowered global income inequality; however, the validity of the model has not been borne out in reality as income inequality has risen in nearly every country. This study refers to prior political and economic research to model why, unlike the Meltzer and Richard (1981) hypothesis, redistribution policies under democracy have failed to adequately counter widening income inequality. By analyzing a variety of scenarios — including captured democracy, policy regime, corrupt government, absence of a political party representing lower-income class interests under a two-party system, and class betrayal voting through identity cleavages — this study finds that even after income redistribution policies are implemented, income inequality may still end up worse than otherwise would have been expected in a democratic system.

The Gordian Knot of Ethno-Religious Nationalism: Unsettled National Questions and Contested Visions

The early twenty-first century has witnessed a rising number of global crises. These include climate change, widening income inequality, military and nuclear tensions between the major powers, repeated outbreaks of global pandemics, and an ongoing democratic recession. In particular, the deepening democratic recession has afflicted ostensibly both mature and newer democracies – contradicting theories of political development. In many countries, the political alliance between ethno- and religious nationalists has reignited assaults against democratic institutions, processes, and norms. This comparative country-case study, principally of Malaysia and the United States of America (US), explores the alliance between ethno- and religious nationalists by examining the forces and factors that have contributed to this combustible dynamic within the context of unsettled national questions, contested constitutional orders, and foundational national visions. Also examined are the narratives of fear, victimhood and privilege that have galvanised religious and ‘sons of the soil’ ethno-nationalists in resisting the building of inclusive multiracial democracies.

Assessing inequality and poverty in long-term growth projections: A general equilibrium analysis for six developing countries

Most projections of long-term economic development, such as the shared socioeconomic pathway (SSP) scenarios in climate change research, do not quantify future effects on income distribution and poverty. To reduce this knowledge gap, we present some numerical simulations based on a recursive-dynamic general equilibrium model with household details, focusing on relative and absolute poverty in six developing countries: Albania, Bolivia, Ethiopia, Malawi, Nicaragua, and Vietnam. The results under the SSP2 reference scenario suggest that the exogenously projected gross domestic product (GDP) and population growth, combined with long-term structural change, produce lower absolute but higher relative poverty. An alternative scenario of stronger trade integration further amplifies the impact on income inequality. Indeed, more international trade tends to increase capital income, which mainly benefits rich households, but generally decreases agricultural earnings, which are important for rural poor households. • We analysed the impact of some long-term projections of economic growth on income distribution and poverty. • We extended a recursive dynamic CGE model with data from household surveys to obtain 12 distinct household classes in six developing countries. • A reference scenario of economic development (SSP2) generally entails widening income inequality. • Accelerated trade integration only marginally amplifies the impact on income inequality, but contributes to eradicating absolute poverty. • Increasing capital incomes and decreasing agricultural earnings are key drivers of the increased inequality.

Does Digitalization Widen Income Inequality? A Comparative Assessment for Advanced and Developing Economies

Abstract The paper raises two questions: (1) Does digitalization contribute to wealth and income inequality? (2) Does it affect inequality differently between advanced and developing economies? For the answers, the paper investigates the impact of digitalization on inequality for a balanced panel dataset of advanced economies and a balanced panel dataset of developing economies from 2002 through 2020. It applies the system-GMM and PMG estimators for estimation and robustness check. Some exciting results it provides. First, digitalization narrows inequality in developed economies and widens in developing economies. Second, the economic growth – income inequality relationship is U-shaped as real GDP per capita increases from low (developing economies) to high (advanced economies). Third, unemployment enhances inequality in two groups. The results note some necessary implications to develop digital technology and reduce income inequality in these economies.

The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia

Despite the recent reduction in the poverty rate in Indonesia, income inequality has not shown any improvement. Income inequality, also known as income disparity, has been a prolonged issue in Indonesia and has caused great dissatisfaction among the public. Many of them do not feel an improvement in their wellbeing. Most studies explore these issues based on microeconomics perspectives, and limited studies focus on macroeconomic determinants. Thus, it is imperative to investigate the potential macroeconomic determinants of income inequality in Indonesia, particularly energy consumption (ENC), corruption (COR), foreign direct investment (FDI), and other supporting determinants such as economic growth (GDP), financial development (FD), and CO2 emissions. Data from 1984 to 2020 were collected and analyzed, employing the autoregressive distributed lag (ARDL) approach. The findings indicate that economic growth, corruption, and FDI can contribute to a smaller gap between the rich and the poor. At the same time, greater CO2 emissions can intensify income inequality in Indonesia both in the short and long run. Pollution, as captured by CO2 emissions, can affect the health of the poor. Health problems create difficulties for poor people to work and reduce the probability of earning income, ultimately widening income inequality. FD and energy use, on the other hand, do not influence income distribution in the long and short run. The findings indicate that boosting economic growth and FDI significantly reduce income disparity in Indonesia. Various policy recommendations are suggested in these studies based on the long-run outcomes.

Does financial inclusion reduce income inequality? Empirical evidence from Asian economies

PurposeThe present study examines the significance of financial inclusion in reducing income inequality in the Asian context.Design/methodology/approachThis study uses panel estimation techniques such as the Pedroni cointegration test, Kao residual-based test, FMOLS, ARDL and Granger causality, a dataset consisting of the Gini coefficient index, three dimensions of financial inclusion measures and one added variable on financial depth, spanning from 2005 to 2019.FindingsThe study finds that in the long-run, income inequality disparity is highly influenced by financial inclusion indicators, such as the number of bank branches, deposit accounts, outstanding loans and domestic credit to the private sector. Whereas in the short run, disparities in income are unaffected by all the indicators of financial inclusion. Further, unidirectional causality from financial inclusion indicators to income inequality necessitates the need for policymakers to design policies and programs that would enhance access to financial services as an essential mechanism to reduce income disparity.Originality/valueStudies based on a panel of Asian countries that have undergone impressive growth of financial inclusion initiatives since the past decade—but are still facing widening income inequality—are conspicuously rare in the literature. The empirical analysis fills this void by showing the significant role financial inclusion indicators play in steering the Asian economies toward income equality throughout the study period.