Re-examining the relationship between economic growth and inequality in the New Member States

The link between income inequality and economic growth has raised many debates in the literature and has generated a large spectrum of results over time. This paper aims at analyzing the relationship between economic growth and income inequality, as well as their macroeconomic and institutional determinants in the New Member States, between 2000 and 2009. In the presence of a set of explicative variables, the economic growth influences the social inequality through a U-shaped relationship. Health, education and gross capital formation generate different direct and indirect effects on income inequality as the per capita GDP growths, while the transition indicators are found to be either common or specific determinants of inequality and growth.     

Inequality and catching-up under decreasing marginal impatience

This paper examines how endogenous time preference interacts with inequalities in economic development. We consider two distinct groups of households with intrinsic inequality (e.g., capitalists and workers), and show that (i) under decreasing marginal impatience (DMI), an unequal society may be preferable for poor households than an egalitarian one in which every household owns an equal share of asset; (ii) poor households tend to benefit more under DMI than CMI (constant marginal impatience) from positive shocks; (iii) inequality exhibits a sharp inverted-U shape as more people become rich, which should be good news for developing countries in catching up; and (iv) a tax on capital income reduces poor households’ income when the fraction of the rich is sufficiently small. We also examine immigration and discuss capital mobility.     

Inference by linearization for Zenga’s new inequality index: a comparison with the Gini index

Zenga’s new inequality curve and index are two recent tools for measuring inequality. Proposed in 2007, they should thus not be mistaken for anterior measures suggested by the same author. This paper focuses on the new measures only, which are hereafter referred to simply as the Zenga curve and Zenga index. The Zenga curve Z(α) involves the ratio of the mean income of the 100α % poorest to that of the 100(1?α)% richest. The Zenga index can also be expressed by means of the Lorenz Curve and some of its properties make it an interesting alternative to the Gini index. Like most other inequality measures, inference on the Zenga index is not straightforward. Some research on its properties and on estimation has already been conducted but inference in the sampling framework is still needed. In this paper, we propose an estimator and variance estimator for the Zenga index when estimated from a complex sampling design. The proposed variance estimator is based on linearization techniques and more specifically on the direct approach presented by Demnati and Rao. The quality of the resulting estimators are evaluated in Monte Carlo simulation studies on real sets of income data. Finally, the advantages of the Zenga index relative to the Gini index are discussed.     

Can innovation improve income inequality? Evidence from panel data

Income inequality is a source of social instability and armed conflict, which in turn are detrimental to economic development. This study examines the role of innovation in income inequality in twenty-three developed countries, using a panel mean group estimator that takes cross-sectional dependence into consideration. Three income inequality indicators are used: the Standardized World Income Inequality Database (SWIID), the University of Texas Inequality Project (UTIP), and the Estimated Household Income Inequality (EHII). The innovation indicators are patent applications and patents granted. The empirical results based on the common correlated effect mean group (CCEMG) reveal that innovation widens income inequality. We also investigate whether the innovation–income inequality nexus is subject to a country’s level of globalization and financial development. The findings suggest that the interaction terms between innovation with these two variables have positive effects on income inequality, whereas innovation failed to reduce income inequality. Globalization and financial development are found to drive income inequality. The empirical results are robust to different income inequality and innovation measures as well as estimation techniques.     

HAPPINESS AND HEALTH: TWO PARADOXES

Abstract This paper aims to establish systematic relationships between the two rapidly growing research streams on the socio‐economic determinants of happiness and health. Although they have been pursued quite independently by different communities of researchers, empirical evidence points to very similar underlying causal mechanisms. In particular, in both cases per capita income seems to play a major role only up to a very low threshold, beyond which relative income and other relational factors become crucial for happiness and health. On the basis of these structural analogies, we argue that a process of cross‐fertilisation between these two research streams would contribute to their development by clarifying the relationship between happiness, health and their determinants. Finally, we observe that the two literatures have converging policy implications: measures meant to reduce poverty and inequality and invest in social and environmental capital may improve both health and happiness of the individuals.     

DOES GOVERNMENT SPENDING AFFECT INCOME INEQUALITY? A META-REGRESSION ANALYSIS

In this paper findings of a meta-regression analysis are presented exploring the effects of government spending on income inequality, with a particular focus on low- and middle-income countries. We identify a total of 84 separate studies containing over 900 estimates of the effect of one or more measures of spending on one or more measures of income inequality. The results show some evidence of a moderate negative relationship between government spending and income inequality, which is strongest for social welfare and other social spending, and when using the Gini coefficient or the top income share as the measure of inequality. However, both the size and direction of the estimated relationship between government spending and income inequality is affected by a range of other factors, including the control variables and estimation method used. We also find evidence of publication bias, in that negative estimates of the relationship appear to be under-reported in the literature.     

THE DRIVERS OF INCOME INEQUALITY IN RICH COUNTRIES

Rising income inequality has recently come centre‐stage as a core societal concern for rich countries. The diagnosis of the forces driving inequality upwards and their relative importance remain hotly contested, notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices. This survey provides a critical review and synthesis of recent research. The focus is on income inequality across the entire distribution, rather than only on what has been happening at the very top. We pay particular attention to include what has been learned from the analysis of micro‐data, to ensure that the coverage is not unduly US‐centric and to analyses of the interrelations between the different drivers of inequality. The marked differences in inequality trends across countries and time periods reflect how global economic forces such as globalization and technological change have interacted with differing national contexts and institutions. Major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades.     

EFFECTS OF LABOR REALLOCATION ON PRODUCTIVITY AND INEQUALITY—INSIGHTS FROM STUDIES ON TRANSITION

From a theoretical perspective, the link between the speed and scope of rapid labor reallocation and productivity growth or income inequality is ambiguous. Do reallocations with more flows tend to produce higher productivity growth? Does such a link appear at the expense of higher income inequality? We explore the rich evidence from earlier studies on worker flows in the period of massive and rapid labor reallocation, that is, the economic transition from a centrally planned to a market-oriented economy in CEE. We have collected over 450 estimates of job flows from the literature and used these inputs to estimate the short-run and long-run relationship between labor market flows, labor productivity, and income inequality. We apply the tools typical for a meta-analysis to verify the empirical regularities between labor flows and productivity growth as well as income inequality. Our findings suggest only weak and short-term links with productivity, driven predominantly by business cycles. However, data reveal a strong pattern for income inequality in the short run—more churning during reallocation is associated with a level effect toward increased Gini indices.     

Wage inequality and the labor market impact of economic transformation: Croatia, 1970–2008

In this paper, we examine wage inequality and wage differentials in Croatia from 1970 to 2008 using two long aggregate time series on the distribution of income. We focus especially on changing income inequality related to educational and vocational attainment, changing income inequality within those groups, and how these two components of inequality were affected by the economic transformation from socialism to capitalism. We find that income inequality between groups rose moderately post-transformation, while overall inequality increased more sharply. This finding is consistent with a growing importance of individual rather than group productivity in labor market compensation, a change broadly consistent with the economic transformation of the Croatian labor market.     

收入流动性对收入不平等的影响

虽然收入流动性在收入分配研究领域正在逐渐升温,但收入流动性对收入不平等的影响这一关键问题的研究不足。文章推导了Gini系数在绝对收入流动性矩阵中对应的表达式,分析了收入流动性矩阵对不平等程度的作用途径。并利用1998年-2002年的收入面板数据验证了该理论分析。实证分析表明,由于向收入高低两端流动的力量增长较快并在势头上超过了同样增长的向中等收入水平流动的力量,整体的收入不平等程度恶化了。     

Corruption, economic growth, and income inequality in Africa

This paper uses panel data from African countries and a dynamic panel estimator to investigate the effects of corruption on economic growth and income distribution. I find that corruption decreases economic growth directly and indirectly through decreased investment in physical capital. A unit increase in corruption reduces the growth rates of GDP and per capita income by between 0.75 and 0.9 percentage points and between 0.39 and 0.41 percentage points per year respectively. The results also indicate that increased corruption is positively correlated with income inequality. The combined effects of decreased income growth and increased inequality suggests that corruption hurts the poor more than the rich in African countries. Received: March 19, 2001 / Accepted: December 14, 2001 RID="*" ID="*" An earlier version of this paper was presented at the first AmFiTan International Conference on Development Ethics in February 2000, Dar er Salaam, Tanzania. I thank two anonymous referees of this Journal for helpful suggestions. I am, however, solely responsible for any remaining errors.     

Do Unions Affect Labor's Share of Income: Evidence Using Panel Data

There have been a number of studies analyzing the impact of unions on labor's share of income. Most have relied on either time series or cross‐section data. The purpose of this paper is to determine the impact of unions on labor's share of income in the U.S. This study adds to the understanding of this topic by developing an analytical model of imperfect competition and estimating the model using panel data for the manufacturing sector. This study finds that unions have a positive impact on labor's share of income. Specifically, this paper finds that labor's share declined 17.9 percent between 1997 and 2006 whereas, if unionization density had remained at its 1997 level, labor's share would have declined only 13.9 percent. Thus, the decline in unionization explains about 29 percent of the decline in labor's share of income. This paper is important for three reasons. First, this paper sheds light on whether social and institutional forces play an important role in determining the distribution of income between labor and capital. Second, it helps to explain recent increases in wage inequality. Third, it has implications for understanding the potential impact of legislation, such as the Employee Free Choice Act, that would make it easier for workers in the U.S. to unionize.     

The Effects of Fiscal Decentralization on Household Income Inequality: Some Empirical Evidence

Abstract

We investigate the effects of fiscal decentralization on income inequality using a sample of 23 OECD countries over the period 1971–2000. We utilize novel and robust measures of fiscal decentralization based on different degrees of fiscal autonomy of sub-central governments. Our results highlight the importance of both the nature of fiscal decentralization—expenditure versus revenue—and the extent to which independent spending responsibility and taxing powers are actually assigned to local governments. A higher degree of tax decentralization is associated with higher household income inequality within a country. Thus, even if fiscal decentralization could be attractive according to efficiency reasons, it may actually have undesirable consequences on the income distribution.     

VOTING, INEQUALITY AND REDISTRIBUTION

Abstract.  This paper surveys models of voting on redistribution. Under reasonable assumptions, the baseline model produces an equilibrium with the extent of redistributive taxation chosen by the median income earner. If the median is poorer than average, redistribution is from rich to poor, and increasing inequality increases redistribution. However, under different assumptions about the economic environment, redistribution may not be simply rich to poor, and inequality need not increase redistribution. Several lines of argument are presented, in particular, political participation, public provision of private goods, public pensions, and tax avoidance or evasion.     

FOSSIL FUEL SUBSIDIES,INCOME INEQUALITY,AND POVERTY: EVIDENCE FROM DEVELOPING COUNTRIES

The past two decades have witnessed widespread attempts to reform fossil fuel subsidies in developing countries. If the reforms are likely to improve economic efficiency, the expected effects on income distribution and poverty are more controversial. This paper reviews the recent literature that examines the impacts of fossil fuel subsidies and their reforms on income inequality and poverty in developing countries. It identifies the different channels that have been explored in the literature and surveys the empirical evidence on the importance of these channels in practice. Drawing on diverse country experiences, it also discusses why fossil fuel subsidies are particularly challenging to reform and highlights several ways in which efforts to reform may be feasible and successful.     

Mobility and the dynamics of poverty in Iran: Evidence from the 1992–1995 panel survey

In the last three decades, revolutionary Iran has experienced large shocks to its political and economic system with likely effects on poverty, inequality, and economic mobility. While poverty has declined, inequality has remained relatively high and stable over nearly four decades. In this paper, for the first time, we examine poverty and inequality in a dynamic context using a 4-year panel data, collected during 1992–1995. We show that short-term income mobility is relatively high, which helps mitigate persistent high inequality. We offer a range of estimates of transition probabilities, indicating that, for example, someone in the lowest (highest) quintile has between 25% and 50% chance of moving up (down) the income ladder. Focusing on the dynamics of poverty, we distinguish between short- and long-term poor and between chronic and transient poverty. Surprisingly, we find that chronic poverty is a more serious problem in urban than rural areas, while transient poverty is geographically more uniformly distributed. Finally, using Tobit and quantile regression, we examine the correlates of these two types of poverty. Both chronic and transient poverty are higher for households headed by women and by younger and less educated men. While minorities suffer more from transient poverty, they are less likely to be chronically poor. We discuss the implications of these findings for policy to alleviate chronic and transient poverty.     

International Differences in Conditional Conservatism – The Role of Unconditional Conservatism and Income Smoothing

Abstract

Prior research documents that conditional conservatism, measured as the asymmetric timeliness of earnings reflecting bad vs. good news, varies with cross-country differences in institutional regimes. In this paper, we examine the determinants of conditional conservatism and related earnings attributes internationally. First, using panel data, we investigate whether competing earnings attributes such as unconditional conservatism and income smoothing affect conditional conservatism and its international differences. We find that these attributes are predictably correlated with conditional conservatism. Second, we address the question whether income smoothing and conditional conservatism are two fundamentally different earnings attributes. We show theoretically that both attributes yield different earnings distributions and that the motivations for producing earnings which possess these attributes differ. To test these predictions empirically, we calculate firm-specific time-series measures of asymmetric timeliness, using a novel trigonometric measure based on the standard Basu (1997)-type regression. Using this cross-sectional data, we test whether conditional conservatism and income smoothing are different and find them to be only weakly correlated for a broad international sample. Also, we demonstrate that income smoothing explains international differences in conditional conservatism. Finally, we estimate simple determinant models of conditional conservatism and income smoothing, showing that both earnings attributes are driven by different explanatory firm-level factors: Conditional conservatism increases with the importance of debt financing, while income smoothing increases with the importance of dividends. Despite some important limitations, we believe our results to be meaningful because they show that cross-country differences in conditional conservatism are influenced by the effects of other accounting properties, predominantly income smoothing. Especially, legal regime appears to drive income smoothing while losing its explanatory power for conditional conservatism when firm-specific factors are controlled for.     

What Do You Know,Who Do You Know?: School as a Site for the Production of Social Capital and its Effects on Income Attainment in Poland and the Czech Republic

This paper criticizes traditional approaches to stratification, which suggest that education contributes to inequality solely by endowing people with different amounts of human capital (knowledge and skills) or credentials. What these approaches overlook is the social component of education—friends, acquaintances and other connections one accumulates while in school. These connections reduce the uncertainty inherently present in the hiring process by compensating for lack of information with trust. We argue that social capital gained while in school has an independent effect on individual income, and show how this effect varies by education and experience levels. Conceptualizing schooling as an important source of social capital and finding ways to disentangle the effects of human and social capital on individual income are a contribution that economic sociologists can make to the study of education and inequality.     

Does Libertè = Egalité? A Survey of the Empirical Links between Democracy and Inequality with Some Evidence on the Transition Economies

Abstract.  The effect of the distribution of political rights on income inequality has been studied both theoretically and empirically. This paper reviews the existing literature and, in particular, the available empirical evidence. Our reading of the literature suggests that formal exclusion from the political process through restrictions on the voting franchise appears to have caused a high degree of economic inequality, and democratization in the form of franchise expansion especially for women, has more often than not led to an expansion in redistribution, at least in the small sample of episodes studied. In a less pronounced way, albeit more emphatically compared to the ambiguous results of the earlier research, the recent evidence indicates an inverse relationship between other measures of democracy, based on civil liberties and political rights, and inequality. The transition experience of the East European countries, however, seems to some extent to go against these conclusions. This, in turn, opens possible new vistas for research, namely the need to incorporate the length of democratic experience and the role played by ideology and social values.