On the suitability of income inequality measures for regional analysis: Some evidence from simulation analysis and bootstrapping tests

The paper looks at the sensitivity of commonly used income inequality measures to changes in the ranking, size and number of regions into which a country is divided. During the analysis, several test distributions of populations and incomes are compared with a ‘reference’ distribution, characterized by an even distribution of population across regional subdivisions. Random permutation tests are also run to determine whether inequality measures commonly used in regional analysis produce meaningful estimates when applied to regions of different population size. The results show that only the population weighted coefficient of variation (Williamson’s index) and population-weighted Gini coefficient may be considered sufficiently reliable inequality measures, when applied to countries with a small number of regions and with varying population sizes.     

Understanding Income Inequality in China: A Multi-Angle Perspective

Economic reforms have brought about spectacular growth and vast improvements of people’s living standards in China since 1978. In the meantime, unbalanced regional growth and income inequality have become two important concerns of future development. Most available studies on income distribution have either focused on the rural population or on the urban citizens. This paper stresses the importance of adopting a multi-angle approach to fully understand income inequality in China. We first use some top-down information to form a general picture of inequality for the whole country, and then use some bottom-up household survey data to explain in detail the development of inequality over time regarding rural/urban inequality, rural inequality, urban inequality and inter-regional inequality, the relative importance of different income sources to overall inequality. This revised version was published online in July 2006 with corrections to the Cover Date.     

Competitive pressures on China: Income inequality and migration

How would perfect competition affect the distribution of income in China? To answer this question, we integrate the two main streams of income distribution theory, namely the functional and the personal income approaches. First, using a general equilibrium model of China comprising 30 sectors and 27 provinces, marginal productivities are used as competitive commodity prices and factor rewards. Second, the rewards are imputed to households using their compositions in terms of persons and factor endowment entitlements. The ensuing distribution is contrasted with the status quo. Less skilled labor would stand to lose and, therefore, inequality would mount. Skilled workers, managers and technicians would move from Western and Central China to Eastern China. These flows would be more than offset by a flow of unskilled labor from Eastern China to Central China. Our finding that Eastern China has too many unskilled workers, relative to the competitive benchmark, suggests that the Harris–Todaro mechanism operates in China. Competition would change the predominant nature of inequality from the rural–urban divide to differences between the social classes. Moreover, the existing negative relationship between development and inequality would evaporate.     

De ontwikkeling van de inkomensongelijkheid gemeten volgens informatietheoretische maatstaven

Summary Some years ago Theil introduced new inequality measures, originating from information theory. He applied them 8.0. to income distributions in the United States. This inequality coefficient is - in contrast to Pareto's constant - based on the whole income distribution. Moreover, the inequality can be disaggregated into inequalities for groups of population. The numerical value of the inequality depends on the chosen class intervals; this may be inconvenient when making comparisons between countries, between different periods and the like. Hence we suggest an appropriate standardizing procedure. The inequality of income distributions has been calculated for the period 1950–1964 and a cornparison is made with Pmm's constant. The investigation relates to three groups of population: wage earners, self employed and others. A remark is made about between-province inequalities.     

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.     

Urban sector income distribution and economic development

This paper examines the relationship between measures of urban sector inequality and economic development for a sample of 25 developing and newly industrialized countries. A U-shaped relationship is found in which bottom urban quintiles' income shares initially decline and then rise as per capita income increases. This relationship is strengthened when an estimate of urban per capita income replaces national per capita income as the development measure. The curves suggest that per capita incomes of the bottom quintiles will never decline as development proceeds, but may rise only very slowly.     

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.     

Some results on general assumptions about the existence of economic equilibrium

In the present paper we maximally use the possibilities provided by the Nash approach and the Kakutani fixed point theorem for proving the existence of an economic equilibrium. We obtain a general existence theorem which does not require a special form for income distribution functions and producer's objectives, independence of consumers' tastes, ordered preference and zero degree homogeneous price dependence. The role of the non-satiation assumption becomes more clear.     

On the distributional effects of trade policy: Dynamics of household saving and asset prices

This paper studies the effect of trade liberalization on inequality. We develop a theoretical framework that generates economy-wide distributions of wealth and income for different levels of trade protection. The model unambiguously determines the effect of liberalization on inequality; and rationalizes why larger inequality can be the outcome of a welfare enhancing policy, as households reduce their buffer savings when liberalization lowers the price of food. The framework reconciles the increase in inequality, the fall in the value of land, and farmers’ opposition to freer trade, that have featured in different liberalization episodes. We also present empirical support for the model’s predictions.     

STATISTICAL INFERENCE VIA BOOTSTRAPPING FOR MEASURES OF INEQUALITY

In this paper we consider the use of bootstrap methods to compute interval estimates and perform hypothesis tests for decomposable measures of economic inequality. Two applications of this approach, using the Gini coefficient and Theil's entropy measures of inequality, are provided. Our first application employs pre- and post-tax aggregate state income data, constructed from the Panel Study of Income Dynamics. We find that although casual observation of the inequality measures suggests that the post-tax distribution of income is less equal among states than pre-tax income, none of these observed differences are statistically significant at the 10% level. Our second application uses the National Longitudinal Survey of Youth data to study youth inequality. We find that youth inequality decreases as the cohort ages, but between age-group inequality has increased in the latter half of the 1980s. The results suggest that (1) statistical inference is essential even when large samples are available, and (2) the bootstrap procedure appears to perform well in this setting. © 1997 by John Wiley & Sons, Ltd.     

IFRS,financial development and income inequality: An empirical study using mediation analysis

Income inequality continues to be an issue of concern. Early work on economic development suggested that, as a country’s economy grows, incomes would rise and reduce any income disparities. However, there is growing evidence that as countries develop, income inequality actually worsens. Some studies argue that this is the result of financial development and the growth of the financial sector. Although there is a good deal of empirical research on the relationship between financial development and income inequality, there is no prior work that examines how accounting standards, in particular International Financial Reporting Standards (IFRS), might influence this relationship. This study examines the relationship of IFRS and financial development with income inequality using mediation analysis over the period from 1998 to 2018. The results indicate that the impact of IFRS on income inequality is mediated by financial development. Moreover, there is a direct relationship between IFRS and inequality.     

农村人口老龄化对收入不平等影响的实证研究

利用1989年-2011年的农户微观家计调查数据,采用方差分解和回归分解相结合的方法,考察农村人口老龄化对收入不平等的影响。研究发现农村收入不平等的总体变化主要是由组间效应所引起,即不同出生组之间不平等程度的加剧是收入不平等的主因;无论采用方差分解法还是采用回归分解法得到的研究结论表明,农村人口老龄化的确加剧了收入不平等,其影响程度相对较小,但从时间变化趋势来看,人口老龄化效应有增强之势。     

The distributional implications of tax and transfer programs in US

The distributional consequences of changes in tax laws and transfer programs in the United States are studied. Using detailed household income data from the Panel Study of Income Dynamics (PSID) from 1981–91, income inequality is measured for both pretax/transfer and post-tax/transfer definitions of household income. A new statistical methodology for assessing the impact of changes in taxes and transfers on the size distribution of income is utilized. Confidence intervals are constructed for various measures of inequality, and hypothesis tests are conducted to determine whether observed changes in the distribution of income due to taxes and transfers are statistically significant. Using decomposable measures of inequality, the implications of type of tax table used are investigated.     

Can educational expansion improve income inequality? Evidences from the CHNS 1997 and 2006 data

Rapid education expansion and rising income inequality are two striking phenomena occurring in China during the transitional period. Using the China Health and Nutrition Survey (CHNS) data collected in 1997 and 2006, this paper studies how education affects individual earnings during the transitional process. We find that education accounts for only a small fraction of the personal earnings and income gap between different groups. We analyze the underlying mechanism of the impact of education on earning. More educated people tend to enter state-owned sectors, have a low probability of changing jobs in the labor market and work less time; all of these will have a pronounced impact on earning and income inequality. Quantile regression analysis shows that the low-income group's education return rate is lower, which helps little in narrowing the income gap. We decompose the earning gap into four factors: population effect, price effect, labor choice effect and unobservable effect. In explaining the earning gap in China, the price effect is more important than the population effect. The labor choice effect is also significant. We conclude that increasing educational expenditure with no complementary measures such as reforming the education system and establishing a competitive labor market helps less in reducing income inequality.     

我国城镇居民初次分配和再分配收入差距的来源及贡献比较

本文测算了改革开放以来我国城镇居民收入差距,并利用收入来源分解基尼系数法对初次分配和再分配收入差距的来源及其对城镇居民收入差距的贡献进行了比较。研究表明,持续扩大的初次分配收入差距是城镇居民收入差距的主要因素,再分配收入对城镇居民收入差距逆向调节。城镇居民收入分配机制还有较大改革空间。本文对此作了实证分析并给出了政策建议。     

Marginal effects of public employment on unconditional distribution of wage income in China

This paper examines the marginal effects of an employment expansion in China’s public sector on the unconditional distribution of “wage income” using the unconditional quantile estimation suggested by Firpo et al. (2009). Empirical data from the China Health and Nutrition Survey is split into three sub-samples to eliminate the effects of the Asian financial crisis in 1997 and the subprime financial crisis in 2008 on our empirical results. To explore the marginal effects, the empirical unconditional distributions of wage income “before” and “after” an expansion of the public employment have been graphed and compared. It has been found that an expansion of China’s public employment reduces the dispersion of wage income and hence alleviates income inequality in China. Besides, an expansion of public employment makes the symmetrical unconditional distribution of wage income become leftward skewed. Given these findings, an expansion of the public employment caused by the strategy of “guojin mintui” could mitigate China’s income inequality.     

Impact of economic growth volatility on income inequality: ASEAN experience

The study attempts to examine the symmetric and the asymmetric impact of volatility of economic growth on the inequality of income in the major ASEAN economies over the period 1980–2015. Financial development, trade openness as a proxy of globalization, inflation, human capital formation, and fiscal policy are utilized as major control variables. The paper tries to explore the causal association between inequality of income distribution and economic growth volatility, exploring simultaneously the long-run association and the short-run dynamics in the time series structure. The study applied Clemente–Montanes–Reyes unit root test to identify the structural break in the time series. Further, the cointegrating relationship of the time series observations was explored by applying the ARDL (linear) bounds test approach along with the nonlinear ARDL for making fruitful comparisons in the long-run relationship among the variables. The countries chosen are Malaysia, Indonesia, Thailand, Singapore and The Philippines. The empirical findings strongly suggest a long-run cointegrating relationship between income inequality and growth volatility with a positive and statistically significant impact. Also, the causality analysis was explored using the Toda and Yamamoto (1995) method of Granger causality. The causality test shows that there exists bidirectional causality from inequality transmission to economic growth volatility. The implications that are developed from this study helps us to understand the various policy reforms in the ASEAN region, that are more transparent and can make these economies less susceptible to risks.     

Unbalanced regional growth and regional income inequality in the latter stages of development

This paper empirically examines the pattern of regional income inequality displayed in advanced stages of economic development, building from the convergent phase of the inverted-U hypothesis, originally developed by Kuznets for personal income inequality, but adapted by Williamson for regional income inequality. It is hypothesized that once the inverted-U pattern is completed, regional income inequality increases, rather than remaining stable. Four analyses of intrastate per capital income inequality among countries are undertaken to test the hypothesis that regional inequality increases. Results indicate strong support for the hypothesis that regional income inequality increases in the latter stages of development.     

初次分配扭曲、财政支出城市偏向与城乡收入差距——来自中国省级面板数据的经验证据

本文在理论分析的基础上,利用中国的省级面板数据和差分广义矩、系统广义矩的方法实证分析了初次分配扭曲、城市偏向的财政再分配政策对城乡收入差距的影响。研究表明,初次分配中劳动报酬比重的下降、城市偏向的财政再分配政策是导致我国城乡收入差距扩大的重要原因。应该通过提高初次分配中劳动者报酬比重,扭转科教文卫、福利保障支出的城市偏向来缩小城乡收入差距。     

Demand for electricity in Nigeria: Some empirical findings

This paper presents the findings from an econometric model of Nigerian electricity demand. Electricity consumers are partitioned into three classes-namely. Residential, Commercial and Industrial. It shows that over the last two decades there has been tremendous increase in both the supply and demand for electric energy. Although supply has increased, it has not been able to keep pace with demand. Various explanatory variables that determine changes in demand are analysed for each of the three consuming sectors. The findings are as follows.(i) Per capital income, previous level of electricity consumption and urbanization are the most significant explanatory variables for the Residential sector's electricity consumption. The short and long-run income elasticities are found to be below unity, while whose of urbanization are above unity. The average price of electricity, though rightly signed, was found to be insignificant.(ii) As regards the commercial sector, the significant explanatory variables were previous level of electricity consumption, income, average price of electricity and urbanization. Urbanization was, however, found to be the most sensitive variable in respect to changes in the sector's electricity demand.(iii) Previous level of industrial electricity consumption and degree of urbanization were the main explanatory variables for changes in the Industrial sector's demand for electricity. Industrial output and income were not found to be significant variables in explaining changes in the Industrial sector's demand for electricity.