Entrepreneurship and income inequality: a spatial panel data analysis

The main objective of this paper is to empirically analyze the relationship between entrepreneurship and income inequality. We use a spatial panel data analysis for both 33 high-income countries and 39 middle- and low-income countries over a period of 11 years. Estimation results and rigorous diagnostic analysis suggest that: (i) there is a strong support for the existence of an inverted U-shaped relationship between entrepreneurship and income inequality espoused by the Kuznets Curve hypothesis; (ii) the relationship between entrepreneurship and income inequality is negatively moderated by country’s level of economic development; (iii) regardless of income inequality levels, entrepreneurship has a non-linear relationship with income per capita; (iv) gross domestic expenditure on research and development exhibits significant negative impacts on entrepreneurship; (v) significant mixed effects on the likelihood of entrepreneurial activity are observed with governance, globalization, population growth rate, and competitiveness variables; (vi) there are significant mixed feedback effects on entrepreneurship; and (vii) there are statistically significant, positive as well as negative spatial spillovers to country-level entrepreneurial activity.     

Inflation and income inequality: A shopping-time approach

Our work is based on a heterogenous agent shopping-time economy in which economic agents present distinct productivities in the production of the consumption good, and differentiated access to transacting assets. The purpose of the analysis is to investigate whether this setting can lead to a positive correlation between inflation and income inequality. Our main result is to show that, provided the productivity of the interest-bearing asset in the transacting technology is high enough, it is true that a positive link between inflation and income inequality is generated. An example is offered to illustrate the mechanism.     

A panel analysis of income inequality and energy use

This paper investigates the relationship between energy consumption and income inequality in an unbalanced panel of 144 countries over the period 1990–2018. Using fixed effect and instrumental variable panel methods and controlling for other determinants of inequality, I find a large and strong negative relationship between energy use and income inequality. The paper also demonstrates that results hold for models which divide the total sample into subsamples of economic blocs and regions. In addition, greater energy use reduces the income share of the top 10% and increases the share of the bottom 40%.     

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.     

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.     

Globalization,decentralization and income inequality: The case of China

The current study examines the effect of trade liberalization and expansion of foreign direct investment inflows, together with the pursuit of decentralization, on China's income inequality between 1985 and 2007. As the degrees of integration of the concerned variables are revealed to be different,Stock and Watson (1993) dynamic ordinary least squares method is employed to reveal the cointegrating relationship. The empirical evidence shows that trade liberalization has led to the higher income inequality, discrediting the Stolper–Samuelson theorem in international trade. There is mixed evidence relating to the effect of FDI inflows on income inequality. Decentralization is shown not to influence it.     

Income inequality,unemployment, and suicide: a panel data analysis of 15 European countries

One of the reasons behind the re-negotiation of the Lomé Convention, resulting in the Cotonou Agreement, was the alleged inability of the trade provisions of Lomé to increase the African, Caribbean and Pacific (ACP) countries' market share of the European Union (EU) market. The Cotonou Agreement may lead to the more advanced ACPs being granted future market access to the EU under a generalized system of preferences (GSP), in conformity with World Trade Organization (WTO) rules. To this end, this paper makes a comparative analysis of the effects of the EU's Lomé Convention and GSP on exports of developing countries using a gravity type of model. The results indicate positive and statistically significant export effects of the both the Lomé Convention and the GSP. The export effects are greater in case of the Lomé Convention throughout the study period running from 1973 to 1992. In addition, the paper illustrates the EU country distribution of the export effects and shows that Belgium and The Netherlands are the EU countries that most have increased their imports from the developing countries under both the Lomé Convention and the GSP.     

A panel data approach to the demand for money and the effects of financial reforms in the Asian countries

Alternative panel data estimation methods are used to estimate the cointegrating equations for the demand for money (M1) for a panel of 14 Asian countries from 1970 to 2005. The effects of financial reforms are analyzed with estimates for two sets of sub-samples and two break dates. Our results show that money demand function has been stable and financial reforms are yet to have any significant effects. Since there is no evidence for instability in the demand for money, the central banks of these countries should use money supply, instead of the rate of interest, as the monetary policy instrument.     

Decentralisation and income inequality in Central and Eastern European countries

This paper provides empirical evidence for the association between fiscal decentralisation and income distribution for a panel of 11 economies from Central and Eastern Europe (CEE) during 1992–2016. We focus on three research topics: the effect of decentralisation on income inequality; the effects of the structure of subnational government finance on income inequality; and the validity of the Kuznets hypothesis. The main findings from the empirical exercise are as follows: first, we provide firm evidence on the presumed favourable effects of fiscal decentralisation on income distribution in the CEE countries; second, our empirical model suggests that the effects of fiscal decentralisation on income inequality are dependent on the source of finance of subnational governments, i.e. intergovernmental transfers may have a role in income equalisation; third, we cannot confirm the validity of the Kuznets hypothesis in CEE countries.     

Reexamining the income inequality in China: Evidence from sequential panel selection method

This study aims to understand whether incomes across different regions in China are converging or diverging. We propose a novel approach to panel unit root testing–sequential panel selection method (SPSM) by using panel Kapetanios et al. (KSS) test with a Fourier function, which is sufficiently efficient to control for structural breaks and nonlinearity as well as cross-sectional dependency. SPSM classifies the whole panel into a group of stationary and nonstationary series. The method also clearly determines how many and which series in the panel are stationary processes. Using the panel data obtained from 31 regions in China, we find out that the real gross domestic product per capita from 1979 to 2010 does not converge in 20 of the 31 regions in China. The evidence of income divergence has important policy implications for China.     

A panel data model for subjective information on household income growth

Subjective expectations about future income changes are analyzed, using household panel data. The models used are extensions of existing binary choice panel data models to the case of ordered response. We consider static models with random and fixed individual effects. We also look at a dynamic random effects model which includes a measure for permanent and transitory income. We find that income change expectations strongly depend on realized income changes in the past: those whose income fell, are more pessimistic than others, while those whose income rose are more optimistic. Expected income changes are also significantly affected by employment status, family composition, permanent income, and past expectations. Expectations are then compared to the head of household’s ex post perception of the realized income change for the same period. The main finding is that rational expectations are rejected, and that in particular, households whose income has decreased in the past underestimate their future income growth.     

Consumption and disposable income in the EU countries: the role of wealth effects

We investigate the long run relationship between private consumption and disposable income for a sample of EU countries using recently developed panel cointegration techniques. For the ordinary consumption-income model the evidence on cointegration is ambiguous. In addition, the cointegration vector obtained by efficient estimation methods is not consistent with theoretical reasoning, as it reflects a decline in the savings rate over time. Extending the analysis by financial wealth improves the model fit markedly. In particular, the income elasticity is not different from 1 and therefore in line with the life cycle permanent income hypothesis. The marginal propensity to consume out of financial wealth is in a range of 3–5%, thereby confirming recent time series results.     

Demand for money in the selected OECD countries: a time series panel data approach and structural breaks

Time series panel data estimation methods are used to estimate the cointegrating equations for the demand for money (M1) for a panel of 11 Organization for Economic Cooperation and Development (OECD) countries for which consistent quarterly data are available. The effects of financial reforms are analysed with structural break tests and estimates for alternative sub-samples. Our results for the post-reform sub-samples show that the income elasticity of the demand for money has decreased and response to interest rate changes has increased.     

Deunionization and pay inequality in OECD Countries: A panel Granger causality approach

The impact of unionization on wage inequality has been examined by a vast literature. Focusing mostly on the US and the UK in time series analyses or on OECD countries in panel data analyses, a bulk of these studies have found a negative impact of deunionization (i.e. decline in the union density rate) on distribution of wages. By utilizing two inequality data sets both provided by the University of Texas Inequality Project and the union density data set provided by OECD this paper contributes to the literature, analyzing the causality relationship between deunionization and pay inequality for 24 OECD countries for the 1963–2000 period within a panel Granger structure. Our findings show not only that there is causality from union density to income inequality but also, perhaps more importantly, point out that there is causality running from income inequality to union density for various set of countries and time periods.     

A new approach to the decomposition of the Gini income inequality ratio

The purpose of this research is to introduce a new approach to the decomposition of the Gini ratio into three components, supporting them with economic and statistical rigorous interpretations. The three components are: (i) the Gini inequalitywithin subpopulations; (ii) thenet contribution of the extended Gini inequalitybetween subpopulations; and (iii) the contribution of theintensity of transvariation between subpopulations. These components are weighted by the product of the population shares times the income shares of the corresponding subpopulations where the weights add to one.The decomposition introduced in this research is applied to the 1990 U.S. family income distribution. The population of families is disaggregated by types into the following subpopulations: (a) married-couple families; (b) male householder, no wife present; and (c) female householder, no husband present.     

Exports and growth: Granger causality analysis on OECD countries with a panel data approach

This paper investigates the possibility of Granger causality between the logarithms of real exports and real GDP in twenty-four OECD countries from 1960 to 1997. A new panel data approach is applied which is based on SUR systems and Wald tests with country specific bootstrap critical values. Two different models are used. A bivariate (GDP–exports) model and a trivariate (GDP–exports–openness) model, both without and with a linear time trend. In each case the analysis focusses on direct, one-period-ahead causality between exports and GDP. The results indicate one-way causality from exports to GDP in Belgium, Denmark, Iceland, Ireland, Italy, New Zealand, Spain and Sweden, one-way causality from GDP to exports in Austria, France, Greece, Japan, Mexico, Norway and Portugal, two-way causality between exports and growth in Canada, Finland and the Netherlands, while in the case of Australia, Korea, Luxembourg, Switzerland, the UK and the USA there is no evidence of causality in either direction.     

The effect of foreign aid on income inequality: Evidence from panel cointegration

This paper examines the long-run effect of foreign aid on income inequality for 21 recipient countries using panel cointegration techniques to control for omitted variable and endogeneity bias. We find that aid exerts an inequality increasing effect on income distribution.