Regional income inequality in China revisited: A perspective from club convergence

Growing income inequality in China has elicited considerable concern, and consensus has not been reached regarding whether regional income converges into one common steady state. The controversy may be attributed to the various definitions and methodologies for testing convergence. This study analyzes regional income inequality and convergence in China from the perspective of club convergence proposed by Phillips and Sul (2007). Instead of one convergence at the national level, we determine that provincial incomes are converging into two clubs: seven east-coastal provinces (Shanghai, Tianjin, Jiangsu, Zhejiang, Guangdong, Shandong, and Fujian) and Inner Mongolia are converging into a high income club, and the remaining provinces are converging into a low income club. In addition, we obtain strong evidence that income inequality within a club decreases, while that between clubs deteriorates over time. Between-club inequality is associated with investment in physical and human capital, as well as population growth rates.     

Analysing convergence in Europe using the non-linear single factor model

We investigate convergence in European price level, unit labour cost, income and productivity data over the period of 1960–2006 using the non-linear time-varying coefficients factor model proposed by Philips and Sul (2007 Econometrica 75:1771–1855). This approach is extremely flexible in order to model a large number of transition paths to convergence. We find regional clusters in consumer price level data. GDP deflator data and unit labor cost data are far less clustered than CPI data. Income per capita data indicate the existence of three convergence clubs without strong regional linkages; Italy and Germany are not converging to any of those clubs. Total factor productivity data indicate the existence of a small club including fast-growing countries and a club consisting of all other countries.     

When is a tax neutral?

A proportional income tax is said to be neutral if variations in the tax rate do not affect the optimal composition of the consumption commodities of a utility maximizing consumer. It is shown that neutrality obtains if and only if the indirect utility function of the consumer is groupwise homothetic. If the income tax rates on labor and property incomes are allowed to differ, then neutrality obtains if and only if the indirect utility function of the consumer is homothetically separable. If, in addition, it is required that the proportional income tax be neutral with respect to not only consumption commodities but also to leisure, then 'the indirect utility function must have the form: $\text{V = V(f(w)+H}{}^1\text{(p))}$, where w and p are the normalized prices of leisure and consumption respectively, and H¹(p) is homogeneous of degree one in p.     

Networks and clubs

We formulate a club model where players’ have identical single-peaked preferences over club sizes as a network formation game. For situations with “many” clubs, we provide necessary and sufficient for non-emptiness of the farsighted core and the direct (or myopic) core. With “too few” clubs, if players are farsighted then the farsighted core is empty. In this same case, if players are myopic then the direct core is always nonempty and, for any club network in the direct core, clubs are of nearly equal size (i.e., clubs differ in size by at most one member).     

On optimal redistributive capital taxation

This paper addresses conflicting results regarding the optimal taxation of capital income. Judd proves that in a steady state, there should be no taxation of capital income. Lansing studies a logarithmic example of one of Judd's models and finds that the optimal steady‐state tax on capital income is not always zero—it is positive in some specifications and negative in some others. There appears to be a contradiction. However, I show that Lansing derives his result by relaxing the convergence hypotheses of Judd's theorem. With less restrictive hypotheses, a wider range of primitives (parameter values, initial condition, etc.) satisfy the hypotheses and because each specification of primitives generates its own optimal time path(s) for the model's variables, it follows that a wider range of time paths with a wider range of steady‐state properties is possible. This raises a question. What happens if the convergence hypotheses are weakened further so that they are satisfied by a wider yet range of primitives? I find that at any interior steady state for the model's optimal tax equilibrium, either the capital tax is zero or else the elasticity of marginal utility is unitary which is satisfied identically in Lansing's log example. In effect, Lansing's example illustrates the only way in which an interior steady state can violate the zero tax result.     

我国流转税收入分配效应的实证分析

对2002-2009年我国增值税、消费税和营业税在不同收入户城镇居民间的分布及其对收入分配的影响进行综合分析,可得出三点基本判断:一是增值税表现出明显的累退性,且累退的症结在于适用低税率商品的消费需求缺乏收入弹性;二是不同消费品的调节效果相互抵消,消费税对收入分配的整体影响并不明显,但呈逐步向累进性发展的趋势;三是营业税表现出稳定的累进性。全部流转税呈现非常轻微的累退性,决定流转税收入调节效果的主导因素是消费品的需求收入弹性。通过恰当选择课税对象和实施差别税率,特定流转税完全有可能起到缩小收入分配差距的作用。     

Income convergence clubs for Brazilian Municipalities: a non-parametric analysis

This article analyses the evolution of relative per capita income distribution of Brazilian municipalities over the period 1970–1996. Analyses are based on non-parametric methodologies and do not assume probability distributions or functional forms for the data. Two convergence tests have been carried out – a test for sigma convergence based on the bootstrap principle and a beta convergence test using smoothing splines for the growth regressions. The results obtained demonstrate the need to model the dynamics of income for Brazilian municipalities as a process of convergence clubs, using the methodology of transition matrices and stochastic kernels. The results show the formation of two convergence clubs, a low income club formed by the municipalities of the North and Northeast regions, and another high income club formed by the municipalities of the Center-West, Southeast and South regions. The formation of convergence clubs is confirmed by a bootstrap test for multimodality.     

Inequality and club formation

We study the relationship between social segmentation and income inequality by means of the economic theory of clubs with private provision of the club good. After having characterized the core partition of society in clubs and investigating its characteristics, we show how the clubs’ sizes depend on income distribution and compare segmentation profiles arising in societies characterized by different inequality patterns.     

Regional convergence clubs in Europe: Identification and conditioning factors

The aim of this paper is to empirically identify convergence clubs in per capita incomes of European regions and to investigate whether initial conditions − as suggested by the club convergence hypothesis − are responsible for club formation. To tackle this issue, we propose a two-step procedure in which we first endogenously identify groups of regions that converge to the same steady state level, and in a second step we investigate the role of starting conditions and structural characteristics for a region's club membership. Our sample comprises 206 European NUTS2 regions between 1990 and 2002. The results strongly support the existence of convergence clubs, indicating that European regions form six separate groups converging to their own steady state paths. Moreover, estimates from an ordered logit model reveal that the level of initial conditions such as human capital and per capita income plays a crucial role in determining the formation of convergence clubs among European regions.     

中国个人所得税的性质及其效果分析

以工资薪金税收为主体的个人所得税是一种消费者税。由于起征额的存在,个人所得税并不是一种完全的所得税,而是一种个人收入调节税。基于消费者税的理论基础,提出了关于中国代表性居民纳税人的理论平均税负的一个简单模型,以及一个关于中国个人所得税对全部税收的贡献率的理论计算公式。中国个人所得税改革应着眼于如何改善工薪所得税的累进性,增强税收的收入再分配职能,相对提高低收入劳动者的实际报酬。为此,应将个人所得税易名为个人收入调节税,减少税率档次,提高免征额。     

Equity,efficiency, and the structure of indirect taxation

Optimal tax formulae are derived and optimal tax rates calculated for the case where there are many consumers, an income tax is impossible and the government has to trade off efficiency in order to improve the real distribution of income. Consistent aggregation assumptions are used to permit the derivation of simple tax rules depending only on the behaviour of the average consumer and of a socially representative consumer. Calculations for the U.K. in 1972 show how subsidies and taxes vary with the government's revenue requirement and with the degree of egalitarianism in the social welfare function.     

Nonstationarity and Stochastic Stability of Relative Income Clubs

The recent literature on “convergence” of cross‐country per capita incomes has been dominated by the two hypotheses of “global convergence” and “club‐convergence,” pertaining to limits of estimated income distribution dynamics. Utilizing a new measure of “stochastic stability,” we establish two stylized facts regarding short‐ and medium‐term distribution dynamics. The first is non‐stationarity of transition dynamics, in the sense of changing transition kernels, and the second is emergence, disappearance, and re‐emergence of a “stochastically stable” middle income group. This middle income group emerges as the gap between rich and poor clubs gets larger, and it changes the dynamics of transition to and from the rich and poor clubs, eventually narrowing the gap between the poor and rich as the middle club vanishes. Analyzing the stochastic stability of middle‐income groups is thus a first step toward understanding higher‐order dynamics of narrowing or widening of the gap between rich and poor countries.     

Real convergence in Europe: A cluster analysis

In this paper we analyse real convergence in GDP per worker in the EU member states. The aim is to test whether there is evidence of club convergence in the EU, i.e. divergence in GDP per worker. Evidence in favour of cluster or club convergence may be an indication of significant productivity divergences between countries, which may also explain the current turmoil in the euro zone. The results show evidence of different economic growth rates within Europe, which also converge to different steady states, implying divergence in the EU-14. Within the EU-14 member states we observe two convergence clubs, which are not related to the fact that some countries belong to the euro area. Furthermore, Eastern European countries are also divided in two clubs, with a more direct effect of belonging to the euro zone in the composition of the clubs.     

RICH STATES,POOR STATES: CONVERGENCE AND POLARISATION IN INDIA

The distribution dynamics of incomes across Indian states are examined using the entire income distribution. Unlike standard regression approaches this approach allows us to identify specific distributional characteristics such as polarisation and stratification. The period between 1965 and 1997 exhibits the formation of two convergence clubs: one at 50% and another at 125% of the national average income. Income disparities across the states declined over the 1960s and then increased from the 1970s to the nineties. Conditioning exercises reveal that the observed polarisation is associated with the disparate distribution of infrastructure. In particular, education, the extent of irrigation and literacy are found to be associated with the formation of the lower convergence club.     

Intergenerational Allocation of Government Expenditures: Externalities and Optimal Taxation

This paper studies optimal capital and labor income taxes when the benefits of public goods are age‐dependent. Provided the government can impose a consumption tax, it can attain the first‐best resource allocation. This involves the uniform taxation of the cohorts' labor income and a zero capital income tax. With no consumption tax and optimally chosen government spending, labor income should be taxed nonuniformly across cohorts and the capital income tax should be nonzero. Deviations of the public goods from their respective optima create distortions. These affect the labor supply decisions of both cohorts and capital accumulation, providing a further reason to tax (or subsidize) capital income.     

Convergence,divergence, or multiple steady states? New evidence on the institutional development within the European Union

Convergence in institutions and in per capita income across the European Union (EU) Member States are key goals of the European integrations process. Especially in the course of the various EU enlargement waves starting in 2004, it was intensively discussed whether institutional and structural homogeneity are necessary preconditions for real convergence and the smooth functioning of the EU or whether a (further) catching up in the institutional and economic development will endogenously occur after the EU accession. Our paper is dedicated to the analysis of these institutional dynamics within the EU. In particular, we analyze the formation of institutional convergence clusters using Phillips and Sul's (2007, 2009) log t-test over the period 2002 to 2018. Our results indicate the existence of multiple institutional clubs with various countries being stuck in a poor institutional trap. Moreover, we find that institutional convergence clubs are formed mainly on the basis of geographic region; in particular, we identify a northwest-southeast divide. When analyzing per capita income clubs, a rather similar picture emerges, suggesting that the underlying institutional clusters might drive the formation of income clubs. We also study the factors that determine institutional club membership by using an ordered probit model. Most importantly, we find that the initial levels of human capital and institutional quality are decisive for determining whether a country is on a high or low institutional growth path.     

Financial development,economic growth and convergence clubs

To study the role of financial development in economic growth, we apply an array of convergence tests designed to capture nonlinear transitional dynamics to real outputs per capita. Strong evidence of multiple convergence clubs is observed, implying that the clubs are formed based on the initial level of real output per capita and average growth rate. Our empirical results show that the stage of economic growth of each country plays an important role for the composition of the convergence clubs. Furthermore, financial development emerges to be a significant determinant, albeit plays differently in the economic growth of each convergence club.     

Club Convergence in Carbon Dioxide Emissions

We examine convergence in carbon dioxide emissions among 128 countries for the period 1960–2003 by means of a new methodology introduced by Phillips and Sul (Econometrica 75(6):1771–1855, 2007a). Contrary to previous studies, our approach allows us to examine for evidence of club convergence, i.e. identify groups of countries that converge to different equilibria. Our results suggest convergence in per capita CO₂ emissions among all the countries under scrutiny in the early years of our sample. However, there seem to be two separate convergence clubs in the recent era that converge to different steady states. Interestingly, we also find evidence of transitioning between the two convergence clubs suggesting either a slow convergence between the two clubs or a tendency for some countries to move from one convergence club to the other.     

On Optimal Commodity Taxes When Consumption Is Time Consuming

This paper studies the problem of optimal taxation of commodities when consumption is a time‐consuming activity. This is done under two distinct preference separability assumptions: between goods and labor supply, and between goods and leisure. It argues that with the labor separability, the traditional uniform taxation results of optimal tax theory continue to hold. With leisure separability, on the other hand, consumption time is a major ingredient of optimal tax rates. However, the relationship between consumption time and optimal tax rates depends crucially on the representation of the economy. In representative consumer economies, time differences determine the pattern of optimal tax rates so that goods whose consumption take more time are subjected to higher tax rates. When individuals have different earning abilities, redistributive, incentive, and efficiency considerations also come into play resulting in a complex relationship. The paper derives formulas for optimal commodity taxes in this case on the basis of three different tax structures: linear commodity taxes in combination with linear and nonlinear income taxes, and nonlinear commodity taxes in combination with nonlinear income taxes.     

Buchanan clubs

This article evaluates the contribution of James M. Buchanan’s theory of clubs. At the outset, the article distinguishes club goods from pure public goods. Next, the article distills the basic mathematical structure of Buchanan’s treatment of clubs. This is followed by some key variants of Buchanan clubs. More general formulations of club theory are also addressed. To demonstrate the wide-ranging importance of Buchanan clubs, the article indicates varied applications of club theory. The article’s message is that club theory remains highly relevant today.