Oil booms and inequality in Iran

We study the response of income inequality to positive per capita oil and gas revenue shocks in Iran. Using historical data from 1973 to 2016 and vector autoregression (VAR) as well as vector error correction (VECM) model‐based impulse‐response functions, we find a positive and statistically significant response of income inequality to oil booms. We also explore possible channels through which oil booms may increase inequality, including private sector credit growth, construction investment, international trade (imports) and real economic output. We find that following an oil boom, higher imports, private sector credit growth, and real economic output can explain the increased income gap to a certain degree in Iran's oil‐based economy. Our analysis can help policymakers evaluate and accommodate the possible positive or negative effects of inequality in Iran resulting from the 2016 lifting of the embargo against the country.     

教育体系、收入分布与经济增长

本文使用一个包含物质资本与人力资本积累的世代交叠模型,研究不同的教育体系对经济增长的影响.我们发现,在公立教育体系下,最优的教育投资水平高于私立教育体系,收入差异也将会比在私立教育体系下下降得更快.因此,与私立教育体系相比,公立教育体系更有利于人力资本积累,在公立教育体系下一个国家将会有更高的经济增长率与更为平等的收入分布.     

Credit constraints,growth and inequality dynamics

This paper examines how credit constraints affect the dynamics of wealth and thereby the dynamics of capital and output growth. We develop standard Ak growth models that display transitional dynamics, contrary to general belief, once the complete credit markets assumption is relaxed. The mechanism is that credit constraints make individual productivity differences persist, which in turn leads to the persistence of income inequality. The dynamics of inequality is jointly determined with the dynamics of aggregate capital. The economy thus passes through a transitional period of inequality, individual and aggregate capital dynamics before it converges to a long-run balanced growth path. The application of the model to the analysis of intergenerational mobility and inequality dynamics suggests substantial economic and policy significance. In particular, introducing credit constraints to the Barro Ak model, public investment could have an indirect impact on growth via its effect on inequality and mobility.     

Heterogeneous Preferences, Education Expenditures and Income Distribution

This paper introduces heterogeneous preferences to a growth model which incorporates human capital, accumulated through either public or private education. The implications of heterogeneous preferences for income and its distribution are the focus of the paper. Public education expenditure is determined through a voting mechanism where the median preference rather than median income household is the decisive voter. The paper extends the work of Glomm and Ravikumar (1992) and shows first, that heterogeneous preferences increase income inequality in the private education model and second, public education can overcome the added heterogeneity and reduce income inequality. The results strengthen the arguments for public education as a redistributive mechanism.     

Competition between private and public schools: testing stratification and pricing predictions

When there are peer effects in education, private schools have an incentive to vary tuition to attract relatively able students. Epple and Romano [American Economic Review 88(1) (1998) 33] develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present. The model predicts that competition will lead private schools to give tuition discounts to more able students, and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector. The model also yields a variety of comparative-static predictions. The predictions of the model are tested in this paper using a unique data set assembled by Figlio and Stone [Research in Labor Economics (1999) 115]. Tests of equilibrium predictions of the model reveal that: The propensity to attend private school increases with both income and ability, and, among private schools, the propensity to attend the highest-tuition schools rises with both income and ability. Within private schools, tuition declines with student ability, with a substantial number of even high-income households paying little or no tuition. The correlation between income and ability is greater in public than private schools. Tests of comparative static predictions of the model reveal that: Both income and ability become stronger predictors of private school attendance as public school expenditure falls. Income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls. Discounts to ability in the lowest-quality private school decline as public school expenditure rises while discounts to ability in the highest-quality private school are little affected by changes in public school expenditure. Expenditure in private schools rises as expenditure in public schools increases. These empirical results are consistent with the predictions of the theoretical model.     

Does income inequality really matter for credit booms?

This paper addresses the question whether income inequality is associated with credit booms, alongside other macroeconomic factors. We distinguish between the different types of credit booms—real estate credit booms, household credit booms, firm credit booms and credit booms that turn into crises. Furthermore, our analysis of a sample of 70 countries between 1990 and 2016 does not provide any evidence of credit booms driving income inequality. We observe that capital inflows increase the likelihood of credit boom occurrence, while countries experiencing high economic growth tend to have more credit booms. Finally, we note that credit booms are more frequent in countries with fixed exchange rate regimes.     

税收、收入不平等和内生经济增长

企业家(通过金融中介)从家庭借贷来支撑创新。二者在企业家的努力不为外人所见的情形下双方签订信用合同分享创新带来的垄断利润(即蛋糕)。两个有代表性经济人(企业家和家庭)的存在允许人们在内生经济增长模型里研究收入不平等。本文研究发现,企业家分配份额的增加一开始会提升增长速度,但是过了一定值后会拉低增长速度;而该份额的增加一直拉大企业家和工人间的收入差距。所以降低企业家获得的蛋糕的份额的分配改革可缩小收入差距。提高企业家来自创新的收入的税率将降低他们的努力程度,从而降低增长速度,但是该税率的提高有助于降低收入不平等程度。存款收入的税率提高尽管不会改变企业家的努力程度,但是也会降低经济增长速度,而且不会降低收入不平等(如果工人有一定比例的存款)。对于劳动收入(工人工资)的税率增加会加剧工人和企业家间的收入不平等,但对经济增长速度没有影响。     

Income Inequality is not Harmful for Growth: Theory and Evidence

The paper shows that income inequality may theoretically lead to higher economic growth if public consumption enters the utility function. Empirically, baseline estimations and a sensitivity analysis show that income inequality is positively, and most of the time significantly, associated with economic growth. These findings stand in sharp contrast to the negative association between inequality and growth propounded by Alesina and Rodrik and by Persson and Tabellini.     

国家公职人员的收入决定——以军人为例的理论分析

本文以军人为例分析证明 ,公共物品供给能够增加经济总产出 ,公职人员的收入水平同经济总产出正相关 ;公职人员的收入是其在私人部门收入的机会成本 ,是由市场间接决定的均衡收入。国家公职人员工资制度改革的基本取向 ,是建立公职人员的收入水平及其增长同经济增长率等宏观经济指标挂钩、同市场领域的个人收入分配保持均衡的机制。     

A quantitative analysis of Turkish Private Education Reform

A recent education policy Turkish government is wishing to undertake is to shut down all private supplementary education centers (SECs) unless SECs manage to convert into a private school. With this policy, the government is willing to increase equality of opportunity among students. We show quantitatively that the policy, in fact, leads to a decrease in equality of opportunity since SECs are given the option to convert into private schools. We use a political economy model of education at which households, heterogeneous with respect to exogenously set income, choose among a continuum of private schools differentiated by tuition and a public school. Households choosing the public school can privately supplement their child's education spending in any amount. Public school is free of charge, and its spending is financed by income tax revenue collected from all households. Income tax rate is determined by majority voting. Achievement of a child depends only on educational spending. We calibrate the model's parameters by matching certain targets from 2013 Turkish data. We then exogenously restrict the supplemental education spending to zero in a counterfactual experiment. We find that variance of achievement (or inequality of opportunity) increases by 23.51% and mean achievement decreases by 1.74%.     

The political economy of public education

I study the relationship between income inequality and public spending in education in a voting model. Voters collectively choose the uniform quality level of public education, the amount of a public good, and the tax rate on labor income. Parents can decide to opt-out of the public education system by purchasing private education at the desired quality level, and children’s expected income is assumed to be increasing in the quality of education. I show that higher income inequality is associated with higher governmental spending in education if and only if the expected marginal returns to education are larger for the children of relatively low income parents. In turn, better public education tends to reduce future inequality. These results are consistent with most findings in the empirical literature about public investment in education. Lastly, I show that for other kind of publicly provided goods, such as health care, the relationship with income inequality exhibits an ambiguous or opposite sign.     

Social security, public education and the growth-inequality relationship

We study how the relationship between economic growth and inequality depends upon the levels of funding of two of the largest government programs, public education and social security. We do this in the context of an overlapping generations economy with heterogeneous agents where the government collects a tax on labor income to finance these programs. We show that in our model an increase in government spending on social security reduces income inequality and can have a non-monotonic effect on growth. When the initial level of social security funding is low, as is the case in most poor economies, then its increase will enhance growth. When its funding level is high as is typical for developed countries, we show that its further increase can slow down growth while reducing income inequality. These results obtain regardless of whether the increase in social security funding is financed by a tax increase or by cutting the public education budget. We also find that the effects of increasing the level of public education expenditures or the overall size of the government budget (holding the budget composition fixed) are characterized by similar non-monotonic growth-inequality relationships.     

Income inequality and economic growth

Despite the extensive existing literature on income inequality and economic growth, there remains considerable disagreement on the effect of inequality on economic growth. Existing literatures find either a positive or a negative relationship. In this paper, we attempt to theoretically examine that relationship with a stochastic optimal growth model. We make the disagreement clear within a single model. We conclude (i) that both are possible – that is, higher inequality can retard growth in the early stage of economic development, and can encourage growth in a near steady state, (ii) that income redistribution by high income tax does not always reduce income inequality. Income inequality can be reduced by higher income tax in a near steady state, but it cannot be reduced in the early stage of economic development, and (iii) that two government polices – rapid economic growth and low income inequality – can be achieved by low income tax in the early stage of economic development, but both cannot be achieved simultaneously in a near steady state.     

The existence of non-elite private schools

We provide an explanation to the puzzle of the existence of paid-for private schools that offer lower quality education than some tuition-free public alternatives. We consider a model of a city composed of two communities: the urban area and the suburbs. The suburban public school provides higher quality education at an implicit price: the higher tax burden plus a housing rent premium. If that price is high enough and the urban public school has a sufficiently low quality, intermediate income households live in the urban area and use a private school. Intermediate quality private schools, then, exist to serve these households' demand. Lower and higher income households use different quality public schools. Therefore, perfect income stratification across public and private education does not characterize this equilibrium.     

Inequality and credit growth in Russian regions

We test the Rajan hypothesis using data for Russian regions from 2000 (after the ruble crisis) to 2012 (before the introduction of international sanctions). The Rajan hypothesis predicts that rising income inequality leads politicians to expand credit for the poor, which in turn, fuels a consumer credit boom. Russia provides a unique research opportunity becaise it is a post-communist transition country with 75 diverse regions. We find that a rise in income inequality is positively correlated with personal loan growth in Russia. We also find a statistically weaker, albeit economically larger, relationship between economic inequality and corporate credit. Taken together, our results provide support for the Rajan hypothesis in a country with extreme regional differences and a long history of populist policies.     

库兹涅茨假说可以解释中国的收入差距变化吗

本文利用中国的数据对经济增长与收入分配的关系进行了经验分析。分析结果没有对库茨涅兹的"倒U型假说"给予足够的支持。中国农村内部、城镇内部和城乡之间的收入差距及其变化特点有其自身的特点,需要从经济发展因素、经济体制转型的因素和政策因素上加以解释。     

Persistent inequality: An explanation based on limited parental altruism

This paper proposes an alternative theory for the observed persistence in income inequality across households, a theory based on limited parental altruism. We argue that the degree of parental altruism is ‘limited’ by the economic status of the parent. A poor parent not only has less ability, but also has less willingness to invest in children's human capital formation. This generates a non-linearity in such investment expenditures. As a result, initial income differences may perpetuate over time—even with convex technology and convex preferences. In this context, we also compare the efficacy of the public vis-à-vis the private education system from the perspective of long run growth.     

Globalization,Neoliberalism and the attack on social security

Neoliberal political movements advocate privatization of public pension systems. Globalization imposes pressure on nations to conform to neoliberal policy views with respect to the design and structure of social insurance, including public pension systems. The paper begins with an investigation of the economic, ethical and ideological dimensions of the privatization debates in the U.S.; it argues that privatization advocates may be largely moved by ideology, since the other reasons advanced appear weak or unfounded. The second part discusses the history of Social Security, the purposes for its creation, and some of its economic effects. Differences between public and private pension systems are considered. A brief international comparison of some aspects of public pension system finance and benefit structures is presented. The final section considers the ethical, macroeconomic and distributional implications of privatization, prefunding and payroll tax funding, and argues for a pay as you go system financed with income taxes. In order to promote equity, economic security, community, and social cohesion, public pension systems should be universal in coverage. In order to reduce the inequality, income insecurity, and aged poverty generated by market economies, public pension systems ought to be progressive: benefit/contribution ratios should be inversely proportional to income, and progressive income taxes should finance the system. To promote economic growth, the systems should be financed on a pay-as-you-go basis, and should not be prefunded except for an emergency reserve. The fiscal policy recommendations partially depend upon the theory developed by Abba Lerner in the 1940s, and recently advanced by Wynne Godley and Randy Wray: Lerner's “principle of functional finance.”     

Financial deepening and income inequality: Is there any financial Kuznets curve in China? The political economy analysis

The interconnectedness of financial deepening and income inequality has been a highly controversial discussion which has not been concluded despite many empirical and theoretical studies up to date. One of the basic building blocks for many research designs is the reliance upon the Kuznets inverted U-shaped curve which postulates that in the first phase of economic growth income inequality increases, peaks and then decreases to a tolerable level in the later phase after a certain income level had been attained. The role of financial deepening in financing economic growth is an indispensable and necessary condition enabling us to easily draw an analogy between financial deepening and income inequality in a financial version of the Kuznets curve. In spite of 30 years of economic and financial reforms in China, which represents a fairly young history of economic growth and development, there are many indicators that Chinese experience significantly deviates from the presupposed inverted U-shaped curve trajectory and its final equalizing effect. This paper relies on financial deepening data measured by monetary aggregate M2/GDP and domestic banking credit/GDP ratios in its claim that they significantly correlate with rising income inequality. The author’s intention consists not in claiming that financial deepening per se causes income inequality, but provides a political economy analysis of the specific institutional and power configuration which leads to their positive relationship. This configuration is determined by the prevailing banking model, the hukou system, financial repression and the decentralized authoritarian system. On the other hand, the absence of inequality-narrowing institutitons further aggravate the problem. All the aforementioned factors are geared at avoiding mechanical and spurious claims that financial deepening increases or decreases income inequality across countries. A historical institutionalism approach to explain China’s path related to the Kuznets curve prediction shows the central validity of open and inclusive institutions in generating inequality-narrowing benefits of financial deepening.     

Public capital,deficit financing,and economic growth in a stochastic economy

This paper examines the relationship among deficit-financing fiscal policy, risk and economic growth in a stochastic endogenous growth model with private and public capital. We show that there are positive balanced-growth rate and a debt-to-GDP ratio that depend on deep parameters such as the income tax rate and the standard deviation of the growth rate of private and public capital. Investment and fiscal shocks influence the mean and variance of the growth rate and the debt dependency rate through portfolio changes and capital accumulation. In particular, an increase in the risk of private investment destabilizes the economy and reduces the mean growth rate if the portfolio change is drastic, and this increase in risk increases the debt-to-GDP ratio. In contrast, an increase in the income tax rate stabilizes the economy, increases the mean growth rate, and has a positive or negative effect on the debt-to-GDP ratio according to the ratio of public to private capital if the income tax rate is sufficiently small.