Linkages between poverty and income inequality of urban–rural sector: a time series analysis of India’s urban-based aspirations from 1951 to 1994

This study examines the impact of urban and rural development on poverty and inequality in India before economic reform. The methodology comprises two dimensions. Modern time series methods are used to uncover the dynamic patterns of urban–rural poverty and income inequality. A machine-learning algorithm is used to determine the causal structure among the development indicators. Our results show that reductions in rural poverty appear to be a more effective in reducing both urban and rural poverty, although the costs of achieving these reductions have not been considered.     

Short-term trends in China’s income inequality and poverty: evidence from a longitudinal household survey

In the past three decades, income inequality in China has increased rapidly relative to both China’s own past and other countries at similar levels of economic development. Using recent longitudinal data from the China Family Panel Studies (CFPS), this article examines changes in income inequality and poverty prevalence between 2010 and 2012. Surprisingly, we find a modest decline in income inequality as measured by the Gini coefficients in the CFPS data. The urban–rural gap narrowed, with rural families enjoying faster income growth than urban families enjoyed. Income growth was greater for middle-income families than for families with either high or low incomes in 2010. By all measures, poverty was greatly reduced between 2010 and 2012. Two-thirds of families that had been poor in 2010 escaped poverty by 2012.     

Pareto–lognormal distributions: Inequality,poverty, and estimation from grouped income data

The (double) Pareto–lognormal is an emerging parametric distribution for income that has a sound underlying generating process, good theoretical properties, and some limited favorable evidence of its fit to data. We extend existing results for this distribution in 3 directions. (1) We derive closed form formula for its moment distribution functions, and for various inequality and poverty measures. (2) We show how it can be estimated from grouped data using GMM. (3) Using grouped data from ten countries, we compare its performance with that of another leading 4-parameter income distribution, the generalized beta-2 distribution. The results confirm that, when using grouped data, both distributions provide a good fit, with the double Pareto–lognormal distribution outperforming the beta distribution in 4 out of 10 cases.     

Economic class and the distribution of income: a time-series analysis of the UK economy, 1955–2010

This paper contributes to our understanding of the determinants and dynamics of surplus-value using quarterly UK data, 1955–2010, and the Johansen (1988 Johansen, S. 1988. Statistical analysis of cointegrated vectors. Journal of Economic Dynamic and Control, 12: 231–54. [Crossref], [Web of Science ®] , [Google Scholar], 1991 Johansen, S. 1991. Estimation and hypothesis of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59: 1551–80. [Crossref], [Web of Science ®] , [Google Scholar]) cointegration and vector error correction model (VECM). A model is introduced to define this Marxian concept, before we explain distribution, paying attention to three forces that are traditionally seen as drivers of power in this struggle: (i) working class militancy; (ii) the size of the ‘reserve army’ of the unemployed; and (iii) political party. Our results demonstrate the ongoing relevance of Marxian economics in providing an alternative, robust and significant explanation of distribution in the post-war UK economy.     

Internationalisation,growth and pay inequality: a cointegration analysis for Turkey, 1970–2007

The nature of the internationalisation-growth-inequality nexus is very complex; and therefore, not surprisingly, there is no consensus on whether increasing openness to trade leads to higher inequality or not – in fact, there is even no full understanding on the impact of the openness on the economic growth. In the case of Turkey it is observed that there is relatively little empirical work that addresses the issue of inequality. Considering this fact, the study aims to provide some more evidence on the complex relationship between trade openness, foreign direct investment, economic growth and pay inequality by utilising a combination of different Theil Indices of pay inequality. The paper utilises the Johansen Cointegration and Granger Causality methods. Our findings yield that higher economic growth resulting from trade openness comes with higher pay inequality.     

Determinants of the income velocity of money in Portugal: 1891–1998

This paper performs a long-run time series analysis of the behaviour of the income velocity of money in Portugal between 1891 and 1998 by assessing the importance of both macroeconomic and institutional factors and looking for particularities in the Portuguese case. We estimate two cointegration vectors for the income velocity of money, macroeconomic variables and institutional variables. It is apparent that one of these vectors reflects the relationship between income velocity and macroeconomic variables, while the other reflects the relationship between income velocity and institutional variables. Moreover, a regression analysis reveals that the usual U-shaped pattern is displayed with a relatively late inflection point located around 1970, which is consistent with the Spanish case. It is further noted that this is a feature of countries with a late economic and institutional development process.     

International income inequality, 2005–2011: what a difference 6 years can make

While much attention has recently been given to the rising inequality in high-income countries, particularly the US, inequality across countries has received less attention. Based on reports of the International Comparison Program, which provide the most accurate measures of PPP income at the country level, this study computes three highly recommended measures of intercountry income inequality for the years 2005 and 2011. A dramatic, and perhaps unprecedented, fall in intercountry inequality over the relatively short period of 6 years is noted. As a correlate of the fall in intercountry inequality, aggregate PPP GDP for six major high-income countries is compared with that for three large developing countries, and the dramatic increase over the 6-year period in the ratio of the total GDP of the three developing countries to that for the six high-income countries is noted, thus extending, from the most accurate data, the theme of the ‘rise of the South’ articulated in Human Development Report 2013.     

Economic liberalization and urban–rural inequality in India: a quantile regression analysis

We examine India’s urban–rural inequality in welfare in 1993–1994 and 2004, a period which coincides with the country’s economic liberalization reforms and rapid economic growth. Using real monthly per capita household consumption expenditure as our measure of welfare, we estimate quantile regressions to analyze the urban–rural welfare gap across the entire welfare distribution. While the urban–rural welfare gap was fairly convex across the welfare distribution in 1993–1994, it became more concave in 2004, with the gap narrowing for the lowest and highest quintiles and widening for the middle three quintiles. The urban–rural gap in returns to all levels of education widened substantially for the bottom four quintiles but became increasingly negative for the top quintile. Applying the Machado and Mata (J Appl Econom 20:445–465, 2005) decomposition technique to decompose the urban–rural welfare gap at each percentile, we find that for the bottom 40% of the distribution, differences in the distribution of covariates became less important while differences in the distribution of returns to covariates became more important in explaining the gap. The opposite was true for the top 40% of the distribution. Our analysis suggests that while the rural poor appear to be catching up with their urban counterparts in terms of labor market characteristics, ten years of economic reforms have intensified the urban–rural gap in returns to these characteristics. On the other hand, the rural rich lag even further behind the urban rich with respect to their labor market characteristics even though the urban–rural gap in the returns to these characteristics has diminished during the reform period. Future efforts to generate urban–rural equality may require policies that seek to equalize returns to labor market characteristics between the two sectors at the lower half of the distribution and improve rural labor market characteristics at the top half of the distribution.     

Can the link between functional and personal income distribution enhance the analysis of inequality?

The aim of this paper is to present a framework which links functional and personal income distribution. In the first part of the paper, Piketty’s book “Capital in the XXI Century” is briefly reviewed. Piketty’s framework is discussed arguing that it can only partially explain levels and changes within personal income distribution. Piketty links the returns from capital r to the rate of growth of national income g in a very innovative way comparing them within a macroeconomic framework. He claims that when returns on capital rise more quickly than the overall economy and taxes on capital remain low, a vicious circle of ever-growing dynastic wealth and growing concentration of wealth takes place. However, the rise in the inequality of personal income distribution cannot only be explained by the rise of capital incomes. An analysis of the generation of personal incomes, and consequently of inequality, requires a suitable framework that links incomes at the macroeconomic level (national accounts) and incomes at the level of the individual/household. It is possible to set up this framework starting from individual endowments and their link to the productive structure: that is to what can be called the “generating function of personal income.” This function transforms personal endowments into personal earnings, given the productive structure, the technologies, and the market rules that determine the functional distribution. Personal income distribution and its inequality are linked to the functional one through the shares of capital and labor owned by each individual. The framework introduced here seems to be a suitable tool to account for the fact that personal income distribution is inextricably tied up to different sources of inequality in the distribution of national income. Sources come from institutional and productive structures (matrix Y), but also from the distribution of endowments and of individual/household entitlements (matrix S). This approach, we argue, allows for the assessment and evaluation of the effects of “ambitious new policies,” aimed at reducing poverty and inequality ex-ante, as suggested by Atkinson in his last book.     

Wage,income and consumption inequality in Japan, 1981–2008: From boom to lost decades

In this paper we document the main features of the distributions of wages, earnings, consumption and wealth in Japan since the early 1980s using four main data sources: the Basic Survey on Wage Structure (BSWS), the Family Income and Expenditure Survey (FIES), the National Survey of Family Income and Expenditure (NSFIE) and the Japanese Panel Survey of Consumers (JPSC). We present an empirical analysis of inequality that specifically considers the path from individual wages and earnings, to household earnings, after-tax income, and finally consumption. We find that household earnings inequality rose substantially over this period. This rise is made up of two distinct episodes: from 1981 to 1996 all incomes rose, but they rose faster at higher percentiles; from 1996 to 2008 incomes above the 50th percentile remained flat but they fell at and below the 50th percentile. Inequality in disposable income and in consumption also rose over this period but to a lesser extent, suggesting taxes and transfers as well as insurance channels available to households helped to insulate household consumption from shocks to wages. We find the same pattern in inequality trends when we look over the life cycle of households as we do over time in the economy. Additionally we find that there are notable differences in the inequality trends for wages and hours between men and women over this period.     

Household poverty and inequality: the implication of migrants’ remittances in Nigeria

This article examines the nature of migrant remittances and the amount by which income poverty and inequality will be reduced given migrants’ remittances. We used the living standard survey (NLSS) data set produced by the government of Nigeria to help track poverty reduction progress. The unit of analysis was the household, upon which information on remittances was analysed. From the results, 94% of households received remittances through internal channels while less than 5% received them through international channels. Remittances alleviated poverty head count by 20% and helped to equalize household income inequality by 25%.     

Do inward looking trade policies affect poverty and income inequality? Evidence from Indonesia's recent wave of rising protectionism

Unlike previous studies which often focus on trade liberalisation, this paper examines the impact of protectionism in the form of import tariffs and mineral export taxes on rural and urban poverty and income inequality for the first time. Using a dynamic computable general equilibrium model on Indonesia, mineral export taxes were found to adversely affect urban and rural poverty but income inequality hardly changed as the decline in income in the higher income group is not significantly different to the decline in low income groups. However, if smelters for mineral ore are developed, then there is not only a fall in poverty, more so for the rural than urban, but there is some decline in income inequality. On the other hand, although the current imposed import tariffs do not affect poverty or income inequality, any further increases from the current low average MFN applied rates, will see a rise in rural and urban poverty and income inequality. By and large, any small improvements in the trade balance brought upon by the mineral tax and import tariffs are more than outweighed by the substantial decline in real household consumption expenditure due to falls in employment and wages, thereby leading to a fall in GDP growth.     

Skilled–unskilled wage inequality,nontraded good and endogenous supply of skilled labour: A theoretical analysis

The paper develops a static four sector competitive general equilibrium model of a small open economy in which skilled labour is endogenously produced by the education sector and is mobile between a traded good sector and a nontraded good sector. Capital is also perfectly mobile among the education sector, skilled labour using traded good sector and the nontraded good sector. However, land and unskilled labour are specific to another traded good sector. We analyse the effects of change in different factor endowments and reduction in tariff rate on skilled–unskilled wage inequality. We find that the effect of a change in different parameters on wage inequality depends on the factor intensity ranking between two skilled labour using sectors and on the relative strength of the marginal effects on demand for and supply of nontraded final good. We also analyse the effects of changes in different parameters on the supply of skilled labour.     

Human capital and income inequality in India: is there a non-linear and asymmetric relationship?

The article attempts to provide empirical evidence on the relationship between human capital and income inequality in India in a non-linear and asymmetric framework. To capture both long-run and short-run asymmetries, we have employed the non-linear autoregressive distributed lag approach using the relevant data from 1970 to 2016. Findings of the article suggest that education expansion acts as a major factor in reducing prevailing high income inequality, that is an increase in average years of schooling results in more equal distribution of income. In contrast, high economic growth, inflation and trade openness create unequal distribution of income. The asymmetric causality test results indicate that there is unidirectional causality running from female human capital, economic growth and inflation to income inequality. From a policy perspective, we suggest that education expansion should be used as a powerful tool to mitigate income inequality by emphasizing the quality of education. At the same time, policies geared towards social benefits, inclusive education, training for unskilled workers and price stability should be encouraged to attain fair income distribution in India.     

Trust and attitudes toward income inequality: Does individualism matter?

In the last decade authors have increasingly examined the role of two cultural traits – trust and individualism – on a variety of economic outcomes ranging from gendered attitudes to entrepreneurship, human capital accumulation, and economic development. While both have positive effects, recent literature suggests that the effects of trust are often conditional on other variables, and this aspect has been neglected in the literature. Indeed, a recent paper found that with respect to gendered attitudes, there are important interactions between the traits of trust and individualism. Building on this foundation we explore how views of trust and individualism interact to affect attitudes about income inequality. Our results show that while views regarding social trust generally positively affect the desire for income equality, this effect is strengthened in the presence of high individualism. Alternatively stated, distrust in highly individualistic environments leads to a greater desire for income differences (inequality). Our result highlights the important role played by market-based price and profit incentives in fostering economic activity and exchange in larger, impersonal extended orders where interpersonal trust and reputational effects are generally absent (in contrast to personal, small group exchange). Our results are robust to a variety of techniques to establish identification and account for sample selection and omitted variable bias.     

Urban–rural income polarization and economic growth in China: evidence from the analysis of a dynamic panel data model

Using a dynamic panel data model and the system GMM, this article examines the relationship between urban–rural income polarization and economic growth at the provincial level in the period 1995 to 2010 in China. The estimated results and significant tests indicate that a certain degree of urban–rural income polarization is beneficial to economic growth at the provincial level in both stages for China as a whole, though the contribution of urban–rural income polarization to economic growth is relatively small. Aggravating urban–rural income polarization has a negative impact on economic growth in China. Based on a cluster analysis of regional economic growth at the provincial level, the authors carried out the same analysis separately for two categories of regions too. The results for those two categories of regions show that positive correlations also exist between urban–rural income polarization and economic growth in both stages, which are very similar to the analysis for the whole of China. In addition, a meaningful finding can be derived that the contribution of consumption growth rate to economic growth rate in the second stage is smaller than that in the first stage obviously.     

The distribution of income in Sri Lanka in 1969–1970 and 1980–1981: A decomposition analysis

In 1977 the Sri Lankan government implemented a comprehensive policy of economic liberalization, removing many government controls on the economy and providing incentives for both foreign and domestic investment. The previous policies were often justified as necessary to maintain an equitable distribution of income. Income data from 1969–1970 and 1980–1981 surveys indicate that inequality has increased, but these data are shown to be unreliable for drawing conclusions on changes in the distribution of income. Expenditure data from the same surveys indicate that inequality has declined in the 1970's, both in the economy as a whole and within all sectors and ethnic groups.     

The role of education and household composition for transitory and permanent income inequality–evidence from PSID data

Transitory and permanent shocks to income have been shown to be important determinants of household consumption. This paper shows that there are significant differences in the trends of transitory and permanent income inequality between demographic groups since the 1980s. Using data from the Panel Study of Income Dynamics, educational attainment and the composition of a household are found to play a key role. While permanent inequality increases steadily for educated households, it is flat over large parts of the sample period for the less educated households. Transitory inequality increases for all households headed by couples whereas it is constant for single households. Altogether, permanent shocks account for a larger part of the income variance of educated households whereas transitory shocks are relatively more important for the less educated. These results are able to shed light on the transmission of changes in income inequality to consumption inequality.     

Urban–rural gap and poverty traps in China: A prefecture level analysis

Urban–rural gap and regional inequality are long-standing problems in China and result in considerable number of studies. This article examines the dynamic behaviours of incomes for both urban and rural areas with a prefectural data set. The analysis is conducted by using a distribution dynamics approach, which have advantages in examination on persistence, polarization and convergence clubs. The results show that persistence and immobility are the dominant characteristics in the income distribution dynamics. The prefectural urban and rural areas converge into their own steady states differentiated in income levels. This pattern of urban–rural gap also exists in three regional groups, namely the eastern, central and western regions. Examination on the dynamics of the poorest areas shows that geographical poverty traps exist in both urban and rural prefectural areas. Our results indicate that more policy interventions are required to narrow down the urban–rural gap and to eliminate the poverty traps in China.     

Dynamics of the growth–inequality nexus in China: roles of surplus labor,openness, education,and technical change in province-panel analysis†

The paper examines the complex interrelationship between economic growth and the urban–rural income inequality in China by estimating a simultaneous equation system. This study uses a panel data-set that covers 29 provinces from 1988 to 2007, and compares the earlier period with the later period. It finds a robust and positive impact of the rural surplus labor on urban–rural inequality, which is consistent with Lewis’ dual economy theory. Economic growth is found to aggravate the urban–rural inequality in the earlier period, but there is no hard evidence in the later period. This implies that China has not yet, or at least by 2007, entered the second stage of the Kuznets curve. We also find no robust evidence on the impact of the inequality on growth in either period, but find robust evidence on the impact of both foreign direct investment and exports on the increasing inequality during the earlier period, whereas no significant impact in the later period is found. Finally, the spread of education reduced the inequality in the earlier period, but no such impact is robust in the later period.