Perspectives on poverty and income inequality in Brazil

Exploratory analysis of the advance tabulations of the 1980 Brazilian demographic census suggests the proportion of the population in poverty fell during the decade 1970–1980. The degree of inequality of the distribution of the income of individuals apparently remained about the same from 1970 to 1980, after rising in the 1960s. This near-constancy of the overall inequality of income distribution resulted from two offsetting changes: a narrowing of the gap between rural and urban incomes, and greater inequality within the rural sector.     

The impact of education on income inequality and intergenerational mobility

This paper analyses the effects of innate ability, compulsory education (grades 1–9), and non-compulsory education (grades 10–12 and higher education) on inequality and intergenerational mobility of income, by constructing a four-period overlapping-generation model. We find that innate ability and family investment in early education play important roles in explaining income inequality and intergenerational income mobility. Though children from the wealthiest families are only 1.36 times ‘smarter’ that those from the poorest, the gap in human capital expands to 2.35 at the end of compulsory education and to 2.89 at the end of non-compulsory education. One important reason for the increase is that poor families invest relatively less in children's early education than do wealthy families; therefore, their children attend lower-quality schools, which results in them being much less likely to participate in higher education. By simulating policy experiments for different types of government education expenditure, we find that direct subsidies to poor parents are the most efficient and effective policy for mitigating poor families' budget constraints with regard to early-education investment in their children.     

Rank, income and income inequality in urban China

While some workers in China attain senior professional level and senior cadre level status (Chuzhang and above), others attain middle rank including middle rank of professional and cadre (Kezhang). This aspect of the Chinese labour force has attracted surprisingly little attention in the literature, a fact which this paper aims to rectify. We define various segments of the urban population in work-active ages and use data from the Chinese Income Project (CHIP) covering eastern, central and western China for 1995 and 2002. For 2002, persons of high rank make up 3% and persons of middle rank make up 14% of persons in work-active ages.Factors that affect a person's likelihood of having high or middle rank are investigated by estimating a multinomial probit model. We find that education, age and gender strongly affect the probability of being employed as a worker of high rank. There is relatively little income inequality among workers of high rank as well as among workers of middle rank. Mean income and household wealth per capita of highly-ranked workers developed more favorably than for other segments of the population studied, and personal income is more polarized by segment in 2002 than in 1995. Workers of high rank, and to a lesser degree, workers of middle rank, are among the winners in economic terms while the increasingly large category of non-workers is the losers. Rates of return to education have increased but income function analysis indicates that this provides only a partial explanation for the increased favorable income situation for workers of high and middle ranks.     

Carbon emissions and income inequality

We find that the distribution of income matters to aggregatecarbon dioxide emissions and hence global warming. Higher inequality,both between and within countries is associated with lower carbonemissions at given average incomes. We also confirm that economicgrowth generally comes with higher emissions. Thus our resultssuggest that trade-offs exist between climate control (on theone hand) and both social equity and economic growth (on theother). However, economic growth improves the trade off withequity, and lower inequality improves the trade off with growth.By combining growth with equity, more pro-poor growth processesyield better longer-term trajectories of carbon emissions.     

Relative income position,individual and social income satisfaction,and income inequality

Summary The survival probability as estimated by an individual is,ceteris paribus supposed to depend on his relative income position in a set of reference incomes. The relative income position is thus defined in close connection to the preference formation theory of Kapteyn. It is shown that then this survival probability, called ‘utility,’ may be equated to the relative income position. A nice result of this approach is the possibility to formulate a utilitarian welfare function, which leads to the definition of income inequality measures. It is shown that the use of sets of reference incomes may lead to considerably smaller measured inequality.     

Analysis of income inequality factors

This paper is a report of the analysis of the basic factors, which form the income differentiation of Russia’s population in the 2000s. This describes the methods and results of calculating differentiated balances of money income and expenditures of the population in 2007–2012.     

Describing and decomposing post-apartheid income inequality in South Africa

This paper describes the changes in inequality in South Africa over the post-apartheid period, using income data from 1993 and 2008. Having shown that the data are comparable over time, it then profiles aggregate changes in income inequality, showing that inequality has increased over the post-apartheid period because an increased share of income has gone to the top decile. Social grants have become much more important as sources of income in the lower deciles. However, income source decomposition shows that the labour market has been and remains the main driver of aggregate inequality. Inequality within each racial group has increased and both standard and new methodologies show that the contribution of between-race inequality has decreased. Both aggregate and within-group inequality are responding to rising unemployment and rising earnings inequality. Those who have neither access to social grants nor the education levels necessary to integrate successfully into a harsh labour market are especially vulnerable.     

Crime and income inequality: An economic approach

Conclusion When a given pie is redivided in a less equalitarian manner, it is uncertain whether those already undertaking illegal activity will increase or decrease their activities, since the return to illegal activities is countered by the loss due to punishment (which is more painful to a criminal who failed) on one hand, and from the cost of the sacrifice of utility from legitimate activities on the other hand.If the absolute level of wealth remains constant but relative position declines, an incentive is generated to re-establish a person's standing by joining the crime industry. This is certainly the case at the margin for those close to the boundary of joining, i.e., those who are almost indifferent between joining or remaining within the legal framework.Assuming an individual is already participating in illegal activities, the effect of either an absolute or relative change in his level of wealth on his level of illegal activities is indeterminate. This applies both to the case where the total wealth of the society is fixed and the share of the pie going to the rich rises and the case where the total pie rose but the entire gain went only to the rich.In summary, it has been shown that an increase in wealth inequality has an indeterminate outcome both with respect to the decision of the poor on whether or not to enter the crime industry and with respect to the decision of those already participating in illegal pursuits to increase or decrease their level of activity. This conclusion is somewhat contrary to the general consensus of the literature, which appears to hold that increases in wealth inequality will tend to increase both the level of participation in the crime industry and the level of output within the industry.     

Trade openness and income inequality in China and the SAARC Region

The paper empirically examines the effects of trade liberalisation on income inequality in China and the South Asian Association for Regional Cooperation countries. Panel data analysis is conducted for the period of 1973 to 2012. The results show that liberal trade policies have increased income inequality in these countries. These results are robust to alternative liberalisation measures. The control variables used have differing effects on income distribution. Per capita income has an increasing effect on income inequality, while education, financial development, financial openness, democracy, and government size are shown to reduce income inequality. These outcomes can be expected to have important policy implications for the use of trade liberalisation in these countries.     

Towards a better measure of income inequality in Indonesia

Indonesia has experienced significant economic growth in recent years (on average, 5% in 2000–08), but many people are still living in poverty. Income inequality, as measured by the official Gini coefficient, has also increased. This paper evaluates household income and income inequality in Indonesia, assessing both market and non-market income to reach a more accurate measure of how actual income affects living standards. We find that if household income considers non-market income, income distribution is significantly more balanced, the coefficient of income inequality falls from 0.41 to 0.21 and the income share of the population's poorest deciles increases more than fivefold. The results suggest that market income alone is a misleading measure of income distribution in Indonesia.     

Inward and outward FDI and income inequality: evidence from Europe

This paper examines the effects of inward and outward FDI on income inequality in Europe using panel cointegration techniques and unbalanced panel regressions. Our main result is that both inward FDI and outward FDI have, on average, a negative long-run effect on income inequality. This result is robust to employing alternative estimation methods, controlling for potential outliers, using different measures of FDI and inequality, and changing the period and sample selection. Other findings are: (i) while the long-run effect of inward and outward FDI on income inequality is clearly negative, their short-run effect appears to be positive. (ii) Long-run causality runs in both directions, suggesting that an increase in inward and outward FDI reduces income inequality in the long run, and that, in turn, a reduction in inequality leads to an increase in inward and outward FDI. (iii) There are large cross-country differences in the long-run effects of inward and outward FDI on income inequality; for some countries the long-run effects on income inequality are positive.     

A Different approach to the measurement of income inequality

This article presents Atkinson indices of racial income inequality for 1954-1989. This approach permits the study of racial inequality and inequality in the overall distribution of income in a consistent framework. The Atkinson index shows that progress towards racial equality stopped much earlier than observation of mean income ratios would suggest and that most of the gains have been eroded.     

Explicit normative measurement of the degree of income inequality

Summary This paper deals with the problem how to measure the degree of inequality implied by a certain distribution of personal incomes. Traditional approaches to this subject, including statistical and welfare-based indicators, possess some important short-comings. As an alternative procedure this paper proposes the use of explicit normative concepts, by defining indicators which measure the divergence between an actual income distribution and a target or desirable one. Several indicators are given. The problem how to specify a target distribution is discussed, and a tractable procedure is indicated. This is applied to both actual and simulated income data. The examples serve only as illustrations of the approach proposed and use of the indicators for actual policy evaluation still requires more data.The author wishes to thank Henk van Metelen and Arend Stemerding for research assistance, and Simon Kuipers, Peter Nijkamp and Jan Tinbergen for their stimulating remarks on an earlier draft of this paper. Of course, they are not responsible for errors and do not necessarily share the opinion expressed in this paper. This paper has been presented at the Econometric Society European Meeting, Helsinki, August 1976. An extensive discussion of different aspects of income distribution is contained in Bartels (1977).     

Nonlinear income variance profiles and consumption inequality over the life cycle

In contrast to many other countries, consumption inequalities in Japan are not constant over household age but increase from around middle age—a fact first highlighted by Ohtake and Saito [Ohtake, F., Saito, M., 1998. Population aging and consumption inequality in Japan. Rev. Income Wealth 44, 361–381]. Given this information, we examine whether this phenomenon is consistent with the standard precautionary saving model developed by Carroll [Carroll, C.D., 1997. Buffer-stock savings and the life cycle/permanent income hypothesis. Quart. J. Econ. 62, 1–56]. Specifically, we investigate: (1) the degree of age dependence of idiosyncratic income risks; and (2) the importance of age dependence for the evolution of inequalities in consumption predicted by the household model of Carroll (1997). We find a strong age dependence of income risks, which creates a nonlinear age–variance profile of income, and the standard precautionary saving model is consistent with the observed consumption inequalities as long as we take the nonlinearity in age–variance profiles of income into account.     

Demographic change and income inequality in the United States, 1976-1989

"The U.S. economy experienced significant increases in the degree of income inequality over the past two decades.... In this paper we consider the effects of race, age, female headship, and college education on the distribution of family income by developing a multivariate methodology that allows us to gauge the influence of one factor while holding other determinants of family incomes constant. Over the period studied we find that race had only a minor effect on the overall size distribution of income. Age had a somewhat greater effect than race. In contrast, the impact of female heads and college education were quite substantial. The multivariate estimates reveal that the effects of female heads and college education both increase the Gini to a much greater extent than the progressivity of federal income taxes decreases it. The effects of college education and female headed families on inequality have grown larger across time, while the influence of age has declined. We find that the effects of race on inequality have changed little over the 1976 to 1989 period."     

Unequal access to education and income distribution

Summary This paper attempts a new specification of the education variable in accounting for differences in income distribution in a cross-sectional analysis of 49 countries. The specification refers to the steepness of the educational pyramid, as measured by the coefficient of variation of enrolments within a given country. This variable alone explains 23 per cent of income inequality across countries (as measured by the Gini coefficient), while in the presence of it the traditional (catch-all) per capita income variable becomes insignificant.This finding indicates the importance of the supply side in relative income determination. It is also suggestive that a policy aiming at equalisation of access to the different levels of education might help in reducing income inequality.I would like to thank Arnold Anderson, Mary Jean Bowman, Jan Tinbergen and Peter Wiles for commenting on an earlier draft of this paper.     

A decomposition analysis of income inequality of Chinese rural households

This paper reports an application of household survey data collected from grain producing areas in five provinces of China to issues of the determinants of rural inequality. Previous studies suggest that non-agricultural activities have been the major cause of rural income inequality, which has important implications for policy formulation. However, our results show that inequality within the grain producing areas was also very high, with differences in crop income as the major source of inequality. The policy implications are also different from those of previous studies. While some suggest that an increase in agricultural income can reduce inequality, our results indicate that this is not universally true. In some cases, whether the increase in crop income has come from state procurement also matters. These results call for a more cautious and area-specific approach to policy formulation as far as inequality is concerned.