Exponential structure of income inequality: evidence from 67 countries

Journal of Economic Interaction and Coordination - Economic competition between humans leads to income inequality, but, so far, there has been little understanding of underlying quantitative...     

The consequences of pandemic-driven inequality

• ▀ According to our analysis, the Covid-19 pandemic is likely to exaggerate global inequality, leading to more aggregate debt among lower earners and higher savings for those at the top. The surge in savings will raise demand for safe assets, which would put downward pressure on long-term government bond yields - already depressed from a chronic shortage of safe assets.
• ▀ Historically, pandemics can trigger a rise in inequality, even over medium-term periods. Pandemics damage confidence in using in-person services, which disproportionately exposes low-skilled work to displacement. A unique feature of this pandemic is that the ability to work from home is proving a key factor in determining job losses - those that can are typically in higher paid jobs.
• ▀ The poorest households spend more of their income on essentials such as housing and basic food. When their incomes fall, they still have to spend on these essentials and so are often forced to take on debt. Conversely, the richest often consume near maximum capacity, so any additional income goes into savings to support future consumption.
• ▀ Higher aggregate savings would, all else equal, drive up demand for safe assets and therefore lower interest rates. Other factors such as weak nominal GDP growth, demographics and a chronic shortage of safe assets will also contribute to keeping yields depressed over the next five years.

     

Earnings inequality narrows for young workers despite a widening wage structure

Inequality of wage rates has widened in the United States. But inequality of earnings also depends on the distribution of hour's worked. If the distribution of hours contracts sufficiently, earnings inequality may narrow despite a widening wage structure. The present study examines recent trends in inequality for young workers and, consistent with the preceding scenario, finds that rising inequality of wage rates has been overwhelmed by declining inequality of hours worked. As a consequence, earnings inequality of young workers declined during the 1980s.     

The index of dissimilarity as a measure of inequality

Quality & Quantity -     

The resource curse and income inequality in Iran

This paper has investigated the relationship between oil revenues and inequality in Iran from 1969 to 2012. For this purpose, a threshold regression model has been used for capturing the non-linearity impact of the share of oil revenues in GDP on inequality. Two indicators have been applied for inequality: “Gini coefficient” and “the share of the richest decile of household expenditures which were relative to the poorest decile”. Estimation results of both inequality models suggested that there is a non-linear relationship as a u-shape between “oil revenues/GDP” and inequality in two regimes of oil revenues including high and low oil revenues regimes. The threshold level of oil revenues divided by GDP was about 10% for both inequality models. Before this threshold value, in low oil revenues regime, an increase of oil revenues would decrease income inequality, but after the threshold level and staying in high oil revenues regime, a rise in oil revenues would increase income inequality in Iran.     

The controversial link between entrepreneurial activity and inequality

International Entrepreneurship and Management Journal - This study illustrates how entrepreneurship may contribute to enhancing economic growth and prosperity by reducing inequality and exclusion....     

The estimation of a family of measures of economic inequality

This paper shows that a broad class of measures of inequality (including those of Herfindahl and Theil) can be readily (and accurately) estimated from grouped data. The methods are similar to those developed earlier by the author for estimating the Gini index. The results are illustrated by estimating Thiel's index from tax data and show that the standard textbook grouping method of assuming that all incomes in any class are at the mid-point can lead to serious error in the resulting estimate of inequality.     

Human capital inequality and income inequality: testing for causality

This study investigates the causal relationship between human capital inequality and income inequality in case of Pakistan. The annual time series data ranging from 1973 to 2009 is used for econometric analysis. Johanson co-integration and Granger Causality tests are used to confirm the existence of long run relationship and the causal relationship between human capital inequality and income inequality. The results indicate that there is positive relationship between the two types of inequalities in the long run. The estimates of causality test indicate that income inequality causes the human capital inequality but human capital inequality does not cause income inequality. Policy initiatives to reduce income inequality may empower people economically to avail skill building opportunities and accumulate their human capital through access to educational services.     

The negative impact of barriers to entry on income inequality

Barriers to entry such as fees, licensing, or educational requirements make it more difficult to start businesses. Problematically, many barriers to entry are due to regulatory capture and serve only to benefit incumbent firms. These regulations, which are created by government, often make it exceedingly difficult for low-income individuals to start new businesses, denying individuals access to higher-paying occupations. I estimate two models and find that barriers to entry increase income inequality. A one-point decrease in the World Bank's ease of starting a business score equates to a 0.15–1.25-point increase in the Gini coefficient.     

Economic growth and inequality: The role of public investment

The relationship between growth and inequality is complex. After discussing some general background issues, motivated by extensive empirical evidence this paper focuses on public investment as a key determinant of the relationship. Two alternative frameworks, each offering sharply contrasting perspectives, are presented. The first employs the “representative consumer theory of distribution” where agent heterogeneity originates with wealth endowments. It yields an equilibrium in which aggregate dynamics drives distributional dynamics. In the second, agent heterogeneity arises from idiosyncratic productivity shocks and generates an equilibrium in which distributional dynamics drive growth. The impact of government investment on growth and inequality are shown to contrast sharply in the two approaches, thus illustrating the complexity of the growth-inequality relationship.     

Income distribution and inequality measurement: The problem of extreme values

We examine the statistical performance of inequality indices in the presence of extreme values in the data and show that these indices are very sensitive to the properties of the income distribution. Estimation and inference can be dramatically affected, especially when the tail of the income distribution is heavy, even when standard bootstrap methods are employed. However, use of appropriate semiparametric methods for modelling the upper tail can greatly improve the performance of even those inequality indices that are normally considered particularly sensitive to extreme values.     

Ubiquitous inequality: The home market effect in a multicountry space

We show that spatial inequalities in an economic space of multiple countries in terms of both nominal income and real income are ubiquitous in the sense that they appear when countries are differentiated by population only. A new trade theory model is constructed without any freely traded homogeneous good, so that we can examine the home market effect (HME) and the non-monotonic relation between income inequalities and globalization. Meanwhile, there are three HME definitions for a two-country space in terms of firm share, labor wage, and trade pattern. The first two remain applicable in a multicountry space, and they are shown to be equivalent. However, a natural extension of the third is not equivalent.     

Multidimensional inequality and inframodular order

Motivated by the pertinence of Pigou–Dalton (PD) transfers for inequality measurement when only one attribute is involved, we show that inframodular functions are consistent with multidimensional PD transfers and that weakly inframodular functions fit more accurately with the traditional notion of PD transfers. We emphasize, for inequality rankings of allocations of multiple attributes in a population, the similarities of the inframodular order, defined using inframodular functions, with the concave order in the unidimensional framework.     

Social identity and schooling inequality

The focus of this paper is to evaluate similarities and differences between and within socio-economic samples of school attendance. Eight variables broadly classified by income, education, family background, and class size, are employed for this purpose. For each of the eight variables, the null hypothesis is that the means by various classifications (income, mother’s schooling, father’s schooling, math score, language score, 4th grade class size, number of 4th grade classes, 4th grade enrollment) are equal against an alternative hypothesis that at least one of the member group differs. The method employed for this purpose is one-way analysis of variance. In each of the classifications, samples were divided to reflect public schools, voucher private schools and unsubsidized private schools as well as the full sample. Furthermore, the full samples are employed to find whether differences between the three groups exist for the eight variables. The full sample is n = 3,776 schools. The results point to statistical significant differences for all of the variables.     

The performance of a knowledge-based system for converting occupational classifications

In (mobility) research a lot of attention is given to models that are used. There is hardly attention for the way data are assigned to the categories as used in the comparisons. Assigning by human coders might cause a lot of errors. This is shown by the results of an experiment. As a first step to solve this problem, a knowledge-based system should be used to perform the conversion of the data. Some conversions in an existing system are investigated.