World Income Research Articles

Revolutions in energy input and material cycling in Earth history and human history

Abstract. Major revolutions in energy capture have occurred in both Earth and human history, with each transition resulting in higher energy input, altered material cycles and major consequences for the internal organization of the respective systems. In Earth history, we identify the origin of anoxygenic photosynthesis, the origin of oxygenic photosynthesis, and land colonization by eukaryotic photosynthesizers as step changes in free energy input to the biosphere. In human history we focus on the Palaeolithic use of fire, the Neolithic revolution to farming, and the Industrial revolution as step changes in free energy input to human societies. In each case we try to quantify the resulting increase in energy input, and discuss the consequences for material cycling and for biological and social organization. For most of human history, energy use by humans was but a tiny fraction of the overall energy input to the biosphere, as would be expected for any heterotrophic species. However, the industrial revolution gave humans the capacity to push energy inputs towards planetary scales and by the end of the 20th century human energy use had reached a magnitude comparable to the biosphere. By distinguishing world regions and income brackets we show the unequal distribution in energy and material use among contemporary humans. Looking ahead, a prospective sustainability revolution will require scaling up new renewable and decarbonized energy technologies and the development of much more efficient material recycling systems – thus creating a more autotrophic social metabolism. Such a transition must also anticipate a level of social organization that can implement the changes in energy input and material cycling without losing the large achievements in standard of living and individual liberation associated with industrial societies.

The World Wealth and Income Database (WID)

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What Drives Governmental Redistribution?

This paper investigates the major drivers of governmental redistribution. Extended and harmonised data on effective redistribution recently provided by the newest version of the Standardized World Income Inequality Database allows for the assessment of the origins of governmental redistribution for a broad sample of countries. Our findings confirm the Meltzer-Richard hypothesis, pointing to a robust positive relationship between market inequality and redistribution. We show that perceptions of inequality are often biased and that the redistribution-enhancing effect of gross inequality is even stronger when individuals are aware of national income disparities. The results also suggest that top income shares tend to impede redistributive policies.

How Can Globalization Affect Income Distribution? Evidence from Developing Countries

ABSTRACTThe standard Hecksher-Ohlin-Samuelson framework claimed that foreign trade benefits developing countries, but many empirical studies suggest otherwise. After analyzing data on income deciles from the World Income Distribution Database for 66 developing countries, we found that trade openness benefits underprivileged people in affluent countries but not in developing countries. Also, external financial flows and democracy in conjunction do not exert significant effects, suggesting that these variables might affect income distribution through different channels. Finally, we reinforce the Kuznets inverted-U hypothesis; namely, the presence of an economic development threshold beyond which low-income deciles would increase.

Why Co-operatives?

In 2006, Muhammed Yunus and the Grameen Bank received the Nobel Peace Prize for their efforts through micro-credit to create economic and social development. Muhammed Yunus received the prize not in the field of economics because only sustainable development of the proletariat and the marginalised sections of society can bring peace. More than 80% of the world’s population lives in countries where income differentials are widening. The poorest 40% of the world’s population accounts for 5% of global income, while the richest 20% accounts for three quarters of world income. According to the World Bank (WB), the proportion of people in the developing world living on less than $1.25 a day was 20.5% in 2010, down from 43.1% in 1990 and 52.2% in 1981 (in 2005 prices). That is 1.22 billion people lived on less than $1.25 a day in 2010 compared with 0.91 billion in 1990 and 1.94 billion in 1981. In this paper an attempt is made to explain the relevance of Marxism and the need for the co-operative movement to assist in providing a means for social well-being of the downtrodden classes of people. Keywords: Economy and social development, sustainable development, Marxism

Why Co-operatives?

In 2006, Muhammed Yunus and the Grameen Bank received the Nobel Peace Prize for their efforts through micro-credit to create economic and social development. Muhammed Yunus received the prize not in the field of economics because only sustainable development of the proletariat and the marginalised sections of society can bring peace. More than 80% of the world’s population lives in countries where income differentials are widening. The poorest 40% of the world’s population accounts for 5% of global income, while the richest 20% accounts for three quarters of world income. According to the World Bank (WB), the proportion of people in the developing world living on less than $1.25 a day was 20.5% in 2010, down from 43.1% in 1990 and 52.2% in 1981 (in 2005 prices). That is 1.22 billion people lived on less than $1.25 a day in 2010 compared with 0.91 billion in 1990 and 1.94 billion in 1981. In this paper an attempt is made to explain the relevance of Marxism and the need for the co-operative movement to assist in providing a means for social well-being of the downtrodden classes of people. Keywords: Economy and social development, sustainable development, Marxism

Follow the Value Added: Bilateral Gross Export Accounting

The diffusion of international production networks has challenged the capability of traditional trade statistics to provide an adequate representation of supply and demand linkages among the economies. To address this issue, new statistical tools (the Inter-Country Input-Output tables) and new analytical frameworks have been developed. Koopman, Wang and Wei propose an accounting methodology to decompose a country’s total gross exports by source and final destination of their embedded value added. We develop this approach further by deriving a fully consistent counterpart for bilateral trade flows, refining the original framework. Along with other contributions, our methodology completes the bridge between traditional trade statistics and the systems of national accounts and provides new tools for investigating global value chains. Here we present two empirical applications of two different versions of our decomposition of bilateral trade flows: one explores the forward linkages of Italian exports; the second derives a measure of the share of value-chain-related trade and assesses how its evolution since the mid-1990s has affected the relationship between world trade and income.

Institutional transformation and the origins of world income distribution

This paper presents an attempt to quantify institutional changes and examine the respective effects of de jure and de facto political institutions on the path of long-run economic growth and development for a large panel of countries in the period 1810–2000. Using factor analysis, latent indices of de jure and de facto political institutions are constructed by exploiting several existing institutional datasets. The empirical evidence consistently suggests that societies with more extractive political institutions in Latin America, South Asia, Middle East and Eastern Europe have achieved systematically slower long-run economic growth and failed to catch-up with the West. The evidence confirms the primacy of de facto institutional differences over de jure institutions in causing differential growth and development outcomes over time. It also explains why highly concentrated political power and extractive political regimes inhibited the path of economic growth by setting persistent barriers to the engagement in collective action. In the long run, institutional differences account for up to two thirds of within-country development path and up to 83% of between-country development gaps.

Invensment, world economy and poor countries

World income is unevenly distributed among developed and rich countries on the one side and the poor and less developed countries on the other side. Poor countries in an attempt to develop its economy faces multiple barriers, the most important population growth, deficiency of resources and capital, shortage of investment in human capital traditions, investment in infrastructure, a low productivity in agriculture and conflicts. Poor countries are trying to develop their economies exporting primary goods order to achieve the benefit of export revenue for the procurement of capital goods. However, fluctuations in the real prices of primary export goods on the world market that can range up from to 40%, disabling poor countries to fully substitute the export of primary goods import capital equipment, especially when exports focused on one primary good. To avoid decreasing a trend in real prices and large price fluctuations around this trend, the poor countries, (primary producers) can only strengthen their economies and increase economic growth of the within global economy, pooling, in order to ensure the stabilization mechanism for certain primary good. Less developed countries consider that achieve greater developments before focusing on industry than on primary production. That is why those due to a shortage of capital, unfavorable resorting to borrowing. Many poor countries cannot require repayment of debt and the rescheduling. Therefore, it is economically justified to those its economic development based on unused comparative advantages, structural adjustment through increased investment, productivity and efficiency. Poor countries require help through international transfers, because they consider that many countries have enriched the colonial exploitation of their resources.

Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013

This paper is a first attempt to study the size and development of the shadow economies of 157 countries over 1999 to 2013. Using a MIMIC model, we find that higher tax and regulatory burden, unemployment and self-employment rates are drivers of the shadow economy, meaning that an increase of these causal variables increases the shadow economy. Our result also confirms previous findings of Friedrich Schneider, Andreas Buehn and Claudia Montenegro (2010). The estimated average of informality of 157 countries around the world, including developing, eastern European, central Asian and high income OECD countries averaged over 1999 to 2013 is 33.77% of official GDP. A critical discussion about the size of these macro-estimates comes to the conclusion that most likely the true shadow economy of these countries is only 69% of their estimated macro-MIMIC-values.

Size and Development of the Shadow Economies of 157 Worldwide Countries: Updated and New Measures from 1999 to 2013

This paper is a first attempt to study the size and development of the shadow economies of 157 countries between 1999 and 2013. Using a MIMIC model, we find that higher tax and regulatory burden, unemployment and self-employment rates are drivers of the shadow economy, meaning that an increase in these causal variables increases the shadow economy. Our result also confirms previous findings of Friedrich Schneider, Andreas Buehn and Claudia Montenegro. The estimated average of informality of 157 countries around the world, including developing, eastern European, central Asian and high income OECD countries averaged over 1999 to 2013 is 33.77% of official GDP. A critical discussion about the size of these macro-estimates comes to the conclusion that most likely the “true” shadow economy of these countries is only 69% of their estimated macro-MIMIC-values.

Appraising cross-national income inequality databases: An introduction

In response to a growing interest in comparing inequality levels and trends across countries, several cross-national inequality databases are now available. These databases differ considerably in purpose, coverage, data sources, inclusion and exclusion criteria, and quality of documentation. A special issue of the Journal of Economic Inequality, which this paper introduces, is devoted to an assessment of the merits and shortcomings of eight such databases. Five of these sets are microdata-based: CEPALSTAT, Income Distribution Database, Luxembourg Income Study, PovcalNet, and Socio-Economic Database for Latin America and the Caribbean. Two are based on secondary sources: All the Ginis and the World Income Inequality Database; and one is generated entirely through multiple-imputation methods: the Standardized World Income Inequality Database. Although there is much agreement across these databases, there is also a nontrivial share of country/year cells for which substantial discrepancies exist. In some cases, different databases would lead users to radically different conclusions about inequality dynamics in certain countries and periods. The methodological differences that lead to these discrepancies often appear to be driven by a fundamental trade-off between a wish for broader coverage on the one hand, and for greater comparability on the other hand. These differences across databases place considerable responsibility on both producers and users: on the former, to better document and explain their assumptions and procedures, and on the latter, to understand the data they are using, rather than merely taking them as true because available.

Economic Freedom and Income Inequality: Evidence from a Panel of Global Economies— A Linear and a Non‐Linear Long‐Run Analysis

This study employs panel data from 138 countries (with unbalanced time frameworks) to investigate the relationship between economic freedom and income inequality. Both linear and non‐linear cointegration methodologies are used to identify a long‐run equilibrium relationship between: (i) the overall Economic Freedom of the World index and income inequality, and (ii) the major areas of the index and income inequality. The linear long‐run parameter estimates document that the association turns out to be negative, while the non‐linear long‐run parameter estimates illustrate that above a threshold point the association between economic freedom and income inequality is negative, while below this threshold point, the association turns out to be positive. The empirical findings survive a number of robustness tests, such as alternative measures of income inequality.

Wealth Inequality and Financial Development: Revisiting the Symmetry Breaking Mechanism

In an overlapping generations model with financial frictions and the fixed investment size requirement, Matsuyama (2004, Econometrica) shows that, in the absence of integrated financial markets, the world economy has a unique steady state, which is symmetric and stable in the sense that inherently identical countries converge to the same income level in the long run, regardless of their initial income level; financial globalization may break this symmetric steady state and lead to cross-country income polarization. He calls this phenomenon symmetry breaking and points out that financial underdevelopment is one of the necessary conditions. We revisit this result by introducing wealth inequality and the minimum investment requirement into his framework. Increasing wealth inequality strictly reduces the possibility of symmetry breaking; if wealth inequality exceeds a threshold value, symmetry breaking does not arise at all, regardless of the level of financial development. Thus, wealth inequality is an equally important factor as financial development in determining the possibility of symmetry breaking. We also address some practical issues in this framework, e.g., the conditions of financial integration, the domestic financial crisis and capital controls, and the world interest rate shocks and income volatility.

Economic inequality is related to cross-national prevalence of psychotic symptoms.

A burgeoning literature documents robust links of income inequality with the prevalence of psychological disorders. The aim of this paper is to extend this literature by examining the effects of cross-national income inequality on prevalence of psychotic symptoms. Analyses used archival data of representative samples from 50 countries (N=249,217). Four types of psychotic symptoms were assessed using the well-validated CIDI interview. We examined the effects of Standardized World Income Inequality Database (SWIID) measures of the concentration of income in the top percentile of people and the Gini coefficient of income inequality. Income inequality was significantly correlated with the national prevalence of hallucinations, delusions of thought control, and delusional mood, and effects withstood control over national indices of per capita income and regime type. Findings were also robust to nonparametric bootstrapping. Although the cross-sectional design limits ability to claim causality, income inequality appears important for understanding psychotic symptoms.

World income inequality databases: an assessment of WIID and SWIID

This article assesses two secondary data compilations about income inequality – the World Income Inequality Database (WIIDv2c), and the Standardized World Income Inequality Database (SWIIDv4.0) which is based on WIID but with all observations multiply-imputed. WIID and SWIID are convenient and accessible sources for researchers seeking cross-national data with global coverage for relatively long time periods. Against these undoubted benefits must be set costs arising from lack of data comparability and quality and also, in the case of SWIID, questions about its imputation model. WIID and SWIID users need to recognize this benefit-cost trade-off and ensure their substantive conclusions are robust to potential data problems. I provide detailed description of the nature and contents of both sources plus illustrative regression analysis. From a data issues perspective, I recommend WIID over SWIID, though my support for use of WIID is conditional.

On the assessment and use of cross-national income inequality datasets

Researchers should ensure the data they employ are fit for their purpose, and they should maximize the quality of the data they choose. In this paper, I review how this advice applies to broadly cross-national research on income inequality. I demonstrate that the guidance offered in Jenkins (J. Econ. Inequal., 2015) to those pursuing cross-national research runs completely counter to the recommendations found in Atkinson and Brandolini (J. Econ. Lit. 39(3), 771–799, 2001, 2009), the source of the aforementioned advice and the works upon which Jenkins (J. Econ. Inequal., 2015) claims its own is based. I then show how the Standardized World Income Inequality Database (SWIID) incorporates Atkinson and Brandolini’s recommendations to provide the most comparable data available for those engaged in broadly cross-national research on income inequality.

Income inequality, life expectancy and cause-specific mortality in 43 European countries, 1987-2008: a fixed effects study.

Whether income inequality is related to population health is still open to debate. We aimed to critically assess the relationship between income inequality and mortality in 43 European countries using comparable data between 1987 and 2008, controlling for time-invariant and time-variant country-level confounding factors. Annual data on income inequality, expressed as Gini index based on net household income, were extracted from the Standardizing the World Income Inequality Database. Data on life expectancy at birth and age-standardized mortality by cause of death were obtained from the Human Lifetable Database and the World Health Organization European Health for All Database. Data on infant mortality were obtained from the United Nations World Population Prospects Database. The relationships between income inequality and mortality indicators were studied using country fixed effects models, adjusted for time trends and country characteristics. Significant associations between income inequality and many mortality indicators were found in pooled cross-sectional regressions, indicating higher mortality in countries with larger income inequalities. Once the country fixed effects were added, all associations between income inequality and mortality indicators became insignificant, except for mortality from external causes and homicide among men, and cancers among women. The significant results for homicide and cancers disappeared after further adjustment for indicators of democracy, education, transition to national independence, armed conflicts, and economic freedom. Cross-sectional associations between income inequality and mortality seem to reflect the confounding effects of other country characteristics. In a European context, national levels of income inequality do not have an independent effect on mortality.Electronic supplementary materialThe online version of this article (doi:10.1007/s10654-015-0066-x) contains supplementary material, which is available to authorized users.

Problems with SWIID: the case of South Africa

The Standardized World Income Inequality Database (SWIID) provides estimates of inequality for South Africa for 1965 which are simply not plausible. Indeed the entire 95 % confidence interval is outside the plausible range. An examination of this case suggests that the SWIID’s promise to capture the “noise” associated with any estimate is unlikely to be warranted. The procedures will provide accurate confidence intervals only in cases where the original measurements are unbiased and the imputation model is reasonable.

Response to Professor Stephen Jenkins’ comments on the World Income Inequality Database (WIID)

Professor Stephen Jenkins (this issue) has conducted an extremely careful and insightful analysis of two datasets, WIID and SWIID. In this short response, we focus on his review of the WIID, maintained and published by UNU-WIDER in agreement with the World Bank. We wish to highlight at the outset that we are very grateful for Professor Jenkins’ expert advice and suggestions; and note that the WIID has over the past couple of years been developed in the direction recommended in the appraisal. This response provides, first, some background to the development and basic philosophy of the WIID, with particular attention to data comparability and proper documentation. We subsequently outline the recent changes made to the database, now available on the internet as the revised version WIID3.0b.1 Finally, we offer some brief concluding remarks.