Does greater income inequality cause increased work hours? New evidence from high income economies

We explore the extent to which individual's allocation of time between labour and leisure is affected by the consumption standards of the rich. Utilizing a panel data methodology and panel Granger causality tests we investigate the relationship between income inequality and work hours for a cluster of 24 high-income OECD countries over the period 1990–2015. Four alternative measures of income inequality are considered. We find that greater income inequality is associated with longer work hours indicating stronger concern for conspicuous consumption rather than conspicuous leisure. Even though the resulting estimates lend support to the theoretical framework on consumption emulation, the generated evidence also appears to be in line with a Duesenberry's and Frank's expenditure cascading approach. The ambiguity however arising from the Granger Causality tests appears to lead – to a certain extent – to different conclusions about the direction of causality or whether a causal relationship does even exist. It is therefore imperative that caution should be exercised when interpreting the direction of the causal dimension.     

Public financing of health expenditures,insurance, and health outcomes

The effects of public financing of health expenditures, insurance coverage and other factors on health outcomes are examined within health production models estimated using 1960–1992 data across 20 OECD countries. Mortality rates are found to depend on the mix of health care expenditures and the type of health insurance coverage. Increases in the publicly financed share of health expenditures are associated with increases in mortality rates. Increases in inpatient and ambulatory insurance coverage are associated with reduced mortality. The effects of GDP, health expenditures and age structure on mortality are similar to those in previous studies. Tobacco use, alcohol use, fat consumption, female labour force participation, and education levels are also significantly related to overall mortality rates. Increases in income inequality are associated with lower mortality rates, suggesting that the negative relationship between inequality and health outcomes suggested by some previous studies does not remain when a more complete model is estimated. The result that increases in public financing increase mortality rates is robust to a number of changes in specifications and samples. Thus, as countries increase the level of their health expenditures, they may want to avoid increasing the proportion of their expenditures that are publicly financed.     

Poverty decompositions with counterfactual income and inequality dynamics

Traditional poverty accounting decomposes changes in a country's poverty headcount ratio into changes in income and inequality. We argue that this approach is unsatisfactory from the perspective of policy analysis because it compares a country in two points of time without taking the country's initial situation, and hence its potential for poverty reduction, into account. We thus suggest comparing traditional poverty decompositions with a counterfactual situation. This counterfactual indicates what a country starting from its initial situation could be expected to achieve in terms of income, inequality, and, hence, poverty developments. We construct those counterfactuals by modeling income and inequality trends characterized by convergence and a “Kuznets” relationship between inequality and development. Parameters in those relationships are estimated using PovcalNet survey data from 144 countries and we construct our counterfactual poverty predictions for 71 developing countries. While there is overall a tight relationship between actual developments and counterfactuals, we identify several cases, where both deviate from each other and discuss the policy implications. We also check for commonalities in differently performing countries and find that those who fell particularly short of expectations often underwent political transition and state fragility.     

Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach*

After‐tax income inequality has risen since the mid‐1990s, as increases in market income inequality have not been offset by greater fiscal redistribution. We argue that the substantial increase in the diversity of consumer goods has mitigated mounting political pressures for redistribution. Within a probabilistic voting framework, we demonstrate that if the share of diversified goods in the consumption bundle increases sufficiently with income, then an increase in goods diversity can reduce the political equilibrium tax rate. Focusing on OECD countries, we find empirical support for both the model's micro‐political foundations and the implied relation between goods diversity and fiscal policy outcomes.     

Is Trade Good for Your Health?*

We use a panel of 219 countries to examine the relationship between a country’s openness to international trade and several health outcomes and find that, in general, increased openness is associated with lower rates of infant mortality and higher life expectancies, especially in developing countries. We find evidence suggesting that some of the positive correlation between trade and health can be attributed to knowledge spillovers. In addition, openness is associated with sound economic policies which themselves are related to better health outcomes.     

我国居民收入不平等的主要原因：市场还是政府政策？

市场因素和政府收入再分配政策是决定一国居民收入不平等程度的两个重要因素。本文采用中国家庭收入调查（China Household Income Project ,CHIP）住户数据,计算出我国居民市场收入基尼系数与可支配收入基尼系数,并同发达国家进行比较,借此探讨目前我国居民收入不平等是由市场力量造成的,还是政府收入再分配政策力度不足的结果。研究发现,从市场收入基尼系数来看,我国与发达国家之间的差距并不大。由此认为,政府收入再分配政策效果不明显是导致我国居民收入分配不平等状况较发达国家严重的主要原因。加大转移支付等再分配政策力度是缓解和改善目前我国居民收入不平等的主要途径。     

Heterogeneity in preferences for redistribution and public spending: A cross-country analysis

Political coordination and policy outcomes may be the result not only of the position of the ‘median voter’ in a political scale but also of the heterogeneity of preferences around the median. Depending on the level of government and the type of policy, such heterogeneity may lead to lower public spending and redistribution. We assess this issue empirically by analyzing the relationship between the distribution of preferences for redistribution and the amount of public expenditure at different levels of government and for several types of spending in 23 European countries. Our results suggest a negative and significant correlation between heterogeneity of preferences for redistribution and public spending that is stronger at the local level and for redistributive functions, independent of the median individual's preferences.     

A natural experiment of the effect of advertising on sales: the SASOL case

China's so-called ‘reform and opening up’ policy (Gai Ge Kai Fang), implemented nearly 30 years ago, has led to tremendous economic development. China's nominal Gross Domestic Product (GDP) was 3.25 trillion US dollars in 2007, making it the fourth largest economy in the world. At the same time, income inequality has become quite skewed in China, inviting considerable criticism. Moreover, the trend towards greater income inequality persists. Of particular public policy relevance is the effect of income inequality on health disparities in China, particularly for low-income households. This study addresses this issue using a longitudinal dataset from the China Health and Nutrition Survey (CHNS) over the period 1997 to 2006. Our central finding is that income inequality affects health differently by socioeconomic status: income inequality harms individual health among low income households by more than it does among high income households. More specifically, health is more adversely affected by greater income inequality for households with low incomes. China's central government is committed to making further investments in the health care system. As part of that effort, attention should be directed at low income households to reduce health inequality, possibly providing them with a health insurance safety net similar to Medicaid in USA.     

Fertility choice,mortality expectations,and interdependent preferences—An empirical analysis

We investigate the empirical relationship between child mortality and fertility across 46 low and middle income countries. Specifically, we model the effect of mortality expectations and interdependent fertility preferences on fertility. The direct marginal effect of mortality expectations on fertility is larger than zero but less than unity. This implies that a decrease in mortality rates leads to a decrease in children born but to an increase in the number of surviving children and hence the rate of population growth. Taking into account interdependent fertility preferences, whereby an individual's fertility choice affects the fertility decisions of others, the marginal effect of mortality expectations on fertility becomes one. Hence, if we allow for both mortality expectations and the amplifying effect of interdependent fertility preferences, a decrease in child mortality has no net effect on the rate of population growth.     

Political economy of income distribution dynamics

Income distribution varies considerably across countries; it tends to become more equal with development in some countries, but just the opposite occurs in other countries. This paper provides a theoretical investigation of the persistent differences in income distribution across countries over time. Motivated by the relationship between income distribution and public spending at different school levels for a broad range of countries over the past 30 years, the analysis centers on the role of public education where specific investments interact with political involvement by different socio-economic groups. Socio-economic groups may form lobbies to influence education policy making. The formation of lobbies is endogenous. Persistent inequality is caused by persistent lobbying efforts of the wealthy that lead to an allocation of public education spending more biased toward them.     

Redistribution in the age of austerity: evidence from Europe 2006–2013

We examine the relationship between changes in a country’s public sector fiscal position on inequality at the top and bottom of the income distribution during the age of austerity from 2006 to 2013. We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on Statistics of Income and Living Conditions (EU-SILC) and IMF data for 12 European countries, we find that more severe adjustments to the cyclically adjusted primary balance (i.e., more austerity) are associated with a more unequal distribution of income driven by rising inequality at the top. The data also weakly suggests a decrease in inequality at the bottom. The distributional impact of austerity measures reflects the reliance on regressive policies and likely produces increased incentives for rent-seeking while reducing incentives for workers to increase productivity.     

The impact of macroeconomic factors on income inequality: Evidence from the BRICS

In this paper we investigate how the evolution of income growth, real interest rates, and inflation have driven income inequality across a variety of countries with particular focus on the BRICS economies (Brazil, Russia, India, China, and South Africa) during the period 2001 to 2015. Our work suggests that, when central banks of the BRICS economies use monetary policy for macroeconomic stabilization, they need to consider the impact monetary policy changes have on the distribution of income in their nations. Our estimates reveal that the unintended consequence of policies that induce economic growth and higher prices is higher income inequality. We find that the positive relationship between the three macroeconomic variables and income inequality for the BRICS economies is stronger during the post-2008 period.     

INEQUALITY OF OPPORTUNITIES VS. INEQUALITY OF OUTCOMES: ARE WESTERN SOCIETIES ALL ALIKE?

This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the 1990s. Equality of opportunity is defined as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. We measure social origin by parental education and occupation and use the database built by Roemer et al. (2003 ). Stochastic dominance is assessed using nonparametric statistical tests. Our results indicate strong disparities in the degree of equality of opportunity across countries and a strong correlation between inequality of outcomes and inequality of opportunity. The U.S. and Italy show up as the most unequal countries in terms of both outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are almost the same in Scandinavian countries even before any redistributive policy. We complement the ordinal comparison by resorting to an original scalar “Gini” index of opportunities, which can be decomposed into a risk and a return component. In our sample, inequality of opportunity is mostly driven by differences in mean income conditional on social origin, and differences in risk compensate the return element in most countries.     

Calculation and decomposition of income inequality in low- and middle-income countries: a survey data analysis

This article estimates income inequality in a sample of four low- and middle-income (LMI) countries namely; Albania, Nepal, Tajikistan and Tanzania using the household survey data – Nepal Living Standard Measurement Survey Second. First, we estimate the income generation function for each country and calculate the income inequality using Gini index (GI). Second, we decompose the income Gini into the determinants of income generation functions. Based on the decomposition result, socio-economic factors are the most important determinants of income inequality followed by geographic factors. Demographic factors have the least effect on income inequality in all four countries. Third, we propose a new method to quantify the effect of change in each covariate of income generation function on income Gini. That allows us to quantify the effects of change in specific policy such as increase in investment in schooling or public health to specific group of the population in society on income inequality. A carefully chosen, integrated policy can significantly reduce inequality in all four countries under study.     

Income, income inequality, and health: Evidence from China

This paper tests using survey data from China whether individual health is associated with income and community-level income inequality. Although poor health and high inequality are key features of many developing countries, most of the earlier literature has drawn on data from developed countries in studying the association between the two. We find that self-reported health status increases with per capita income, but at a decreasing rate. Controlling for per capita income, we find an inverted-U association between self-reported health status and income inequality, which suggests that high inequality in a community poses threats to health. We also find that high inequality increases the probability of health-compromising behavior such as smoking and alcohol consumption. Most of our findings are robust to different measures of health status and income inequality. Journal of Comparative Economics 34 (4) (2006) 668–693.     

Risk perceptions,income transformations and inequality

We examine the relationship between perceptions of risk and income levels by exploiting the formal relationship between risk analysis and inequality analysis. Using a questionnaire-experimental approach, we investigate the effect of income transformations on people's orderings of distributions. We find that, while Dalton's conjecture is confirmed for probability distributions, the corresponding result is not confirmed for income distributions.     

The relationship between income inequality and aggregate saving: an empirical analysis using cross-country panel data

If the rich save more than the poor, an increase in income inequality raises aggregate saving. We investigate whether income inequality is positively related to aggregate saving ratio by estimating a fixed-effect model based on a panel data of 48 countries for the period 1991–2010. We find evidence that aggregate saving ratio increases with income inequality using various inequality measures. In particular, the effect of income distribution on saving is greater and statistically more significant with in financially developed, rich and OECD countries. It suggests that the rich save much more than the poor under advanced financial system and in a rich country. We also find that the relationship between income inequality and saving ratio is closer in the 2000s than the 1990s. This finding may result from financial development and the high income level in the 2000s.     

中国农村的收入差距与健康

随着收入差距的扩大,收入分配对健康和健康不平等的影响日益受到关注。本文利用中国健康营养调查(CHNS)1997年和2000年农村的面板数据回答两个问题:收入差距对健康的影响以及影响健康的方式;收入差距的扩大是否会导致健康不平等的加剧,尤其是低收入人群的健康是否受到更为不利的影响。研究发现,首先收入差距对健康的影响存在滞后效应;其次,收入差距对健康的影响呈现“倒U”型,在收入差距较高时,收入差距对健康的影响主要为负向的,一个可能的原因是收入差距影响到公共卫生设施的供给。再次,收入差距的扩大会加强收入效应,其含义是如果低收入人群的收入更容易受到负向冲击,那么收入差距对低收入人群的健康更为不利。     

Economic and other determinants of infant and child mortality in small developing countries: the case of Central America and the Caribbean

Inter-country differences in infant and child mortality are explained by looking at demographic, economic, health and educational factors. A model is presented in which the infant mortality rate, the child mortality rate, and the birth rate are endogenous. The model is tested using cross-national multiple regression analysis and simulations. The presence of simultaneity is confirmed. Introducing non-economic factors transforms the character of the relationship between exogenous and endogenous variables, from a 'diminishing returns' to an 'increasing returns' one. The role played by public expenditure in education, vaccination coverage, low birth weight, female schooling, number of nurses, access to safe water, or malnutrition can be assessed, as well as that played by 'structural adjustment' variables such as the inflation rate or the external debt to GNP ratio. Infant and child mortality can be diminished everywhere in the region with relatively small amounts of expenditure. Disappointing outcomes in some countries obey political rather than economic problems. It would be a mistake to blame the debt crisis.     

POOR AND SICK: ESTIMATING THE RELATIONSHIP BETWEEN HOUSEHOLD INCOME AND HEALTH

This study evaluates the effect of the individual's household income on their health at the later stages of working life. A structural equation model is utilized in order to derive a composite and continuous index of the latent health status from qualitative health status indicators. The endogenous relationship between health status and household income status is taken into account by using IV estimators. The findings reveal a significant effect of individual household income on health before and after endogeneity is taken into account as well as a host of other factors known to influence health, including hereditary factors and the individual's locus of control. Importantly, it is also shown that the childhood socioeconomic position of the individual has long lasting effects on health as it appears to play a significant role in determining health during the later stages of working life.