ECONOMIC FREEDOM AND INCOME INEQUALITY REVISITED: EVIDENCE FROM A PANEL ERROR CORRECTION MODEL

We investigate the causal relationship between income inequality and economic freedom using data from U.S. states over the period 1981 to 2004 within a panel error correction model framework. The results indicate bidirectional causality between income inequality and economic freedom in both the short and the long run. These results suggest that high income inequality may cause states to implement redistributive policies causing economic freedom to decline. As economic freedom declines, income inequality rises even more. In other words, it is quite possible for a state to get caught in a vicious circle of high income inequality and heavy redistribution. (JEL D63, H11)     

MICROECONOMIC REFORM AND INCOME DISTRIBUTION: THE CASE OF AUSTRALIAN PORTS AND RAIL FREIGHT

We analyze structural changes in the Australian ports and rail freight industries that were driven by microeconomic reform; we find such reforms may generate welfare gains with reduced inequality. We estimate the effects on household income groups of these industry changes by applying a computable general equilibrium model incorporating microsimulation behavior. The structural changes lead to a small increase in household welfare in most regions, with an overall increase of 0.18%, and a small decrease in inequality. Our analysis suggests that policy makers in Australia and other high‐income nations should give serious consideration to microeconomic reform of infrastructure industries. (JEL C68, C69, D31, L92)     

股市发展与收入分配不平等

股市发展与收入分配状况的关系是金融理论界和业界广泛关注的问题之一。本文构造全球33个国家从1988年至2013年有关股市发展和收入分配不平等的面板数据,实证研究各国股市发展及自由化改革对其收入分配不平等程度的影响及内在机理。研究发现：首先,一国股市规模越大,由于门槛效应的存在,其收入分配状况趋于恶化,而流动性的提升将在一定程度上改善其收入分配状况。其次,一国股市的发展对不同收入阶层存在不同的影响。最后,股市自由化前后,股市对收入分配状况的影响存在显著差异：股市自由化之后,股市规模的扩大和股市流动性的提升将在一定程度上改善收入分配状况。     

FINANCIAL DEVELOPMENT AND THE FDI‐INEQUALITY NEXUS

This article empirically investigates whether the link between foreign direct investment (FDI) and income inequality varies with financial development. Using a smooth transition regression model to a panel of developing and advanced countries over the period of 1976–2005, the results indicate that financial development indeed defines the relationship between FDI and inequality. FDI raises income inequality and the effect becomes stronger in magnitude with financial sophistication. The results also indicate a large variation in the FDI effect across countries and over time, contingent on financial development. (JEL C23, F40, O15)     

How Does Fiscal Consolidation Impact on Income Inequality?

In this paper, we assess the impact of fiscal consolidation on income inequality. Using a panel of 18 industrialized countries from 1978 to 2009, we find that income inequality significantly rises during periods of fiscal consolidation. In addition, while fiscal policy that is driven by spending cuts seems to be detrimental for income distribution, tax hikes seem to have an equalizing effect. We also show that the size of the fiscal consolidation program (in percentage of GDP) has an impact on income inequality. In particular, when consolidation plans represent a small share of GDP, the income gap widens, suggesting that the burden associated with the effort affects disproportionately households at the bottom of the income distribution. Considering the linkages between banking crises and fiscal consolidation, we find that the effect on the income gap is amplified when fiscal adjustments take place after the resolution of such financial turmoil. Similarly, fiscal consolidation programs combined with inflation are likely to increase inequality and the effects of fiscal adjustments on inequality are amplified during periods of relatively low growth. Our results also provide support for a non‐linear relationship between inequality and income and corroborate the idea that trade can promote a more equal distribution of income.     

The response of household debt to income inequality shocks: a heterogeneous approach

This article explores the impact of changes in income inequality on household indebtedness using Pedroni's heterogeneous panel VAR. As a result, we find evidence in support of large cross-country heterogeneity in the responses of household leverage to income inequality shocks. We also find that such heterogeneity stems from differences in the strength of financial regulations and supervision.     

MEASURING THE IMPACT OF VALUING HEALTH INSURANCE ON LEVELS AND TRENDS IN INEQUALITY AND HOW THE AFFORDABLE CARE ACT OF 2010 COULD AFFECT THEM

A substantial part of the U.S. inequality literature focuses on yearly levels and trends in pre‐tax, post‐transfer cash income and its distribution over time and finds that median income appears to be stagnating, with income growth primarily coming at higher income levels. When we use data from the Current Population Survey for 1995–2008 and add the value of employer‐ and government‐provided health insurance coverage, not only does it increase the upward trend in the level of resources controlled by Americans, but also reduces the level of inequality in these resources and its upward trend. We then provide a highly stylized example of this broader income measure's value in capturing the impact of two key provisions of the Affordable Care Act of 2010—an expansion in Medicaid and the provision of subsidies to lower‐income families for purchasing private coverage on state‐run exchanges. Even though these incremental expansions build on existing systems of government‐provided health insurance, we find that the vast majority of the benefits would still accrue to the bottom three deciles of the income distribution when we include the value of employer‐ and government‐provided health insurance in our expanded yearly income measure. (JEL D31, H51, I14)     

On the impact of innovation and inequality in economic growth

We present robust results on the empirical relationship among income inequality, innovation, and economic growth for a panel dataset of 74 countries over the period 1996–2014. We estimate pairwise causality tests to show that there is bidirectional causality between GDP per capita and R&D, while R&D causes the Gini index of income inequality, and it causes human capital. Allowing coefficients to be different across cross-sections of countries, we get in any case a pairwise bi-directionality. By dynamic panel data estimations, when regressing R&D on GDP per capita, we obtain a threshold value of 0.16% of R&D such that for values above it there is economic growth. While regressing R&D on the Gini index, we get a threshold of 0.10% of R&D above which, the income distribution begins to improve. Finally, we estimate a growth equation that depends on R&D, income inequality, and physical capital. We obtain two thresholds, one of 38.79 for the Gini (above which the economic growth decreases), and one of 0.06% for R&D such that above it, economic growth is rising.     

GROWTH,INEQUALITY, AND ECONOMIC FREEDOM: EVIDENCE FROM THE U.S. STATES

This article returns to the discussion of how income inequality affects economic growth. The main argument of the article is that economic freedom is likely to mediate the association between inequality and growth. In a panel of 300 observations from six 5‐year periods across the 50 U.S. states, I employ five different measures of inequality. The results show that across measures, the growth effects of inequality turn more positive with more economic freedom. The moderating effects are mainly driven by measures of public sector consumption. (JEL O11, O38, O43, P48)     

收入不平等与经济增长：移动的库兹涅茨曲线*——新时期收入分配改革的思路与意义

准确判断收入不平等对经济增长的影响，对于客观评价中国各个阶段的收入分配制度改革尤为重要。本文在统一增长理论的框架下引入收入不平等因素，构建了一个人口数量、不平等和经济增长同时内生的理论模型，并利用CGSS数据构造收入不平等指标，使用中国省际非平衡面板数据进行经验检验。研究发现：收入不平等与经济增长之间呈现倒U型关系。更重要的是，随着经济发展水平的提高，倒U型曲线将逐渐向左移动，即最优的收入不平等程度随着经济发展水平的提高而逐渐降低。这一发现意味着改革开放以来，中国各个时期的收入分配制度改革均是在特定历史条件下的最优选择。本文的结论具有深刻的政策含义：为了提高经济增长率，需要进一步巩固“脱贫攻坚”成果，逐渐加大收入分配调节力度，使收入分配制度改革紧跟经济发展的步伐，根据经济发展水平不断缩小收入不平等程度。     

ESTIMATING THE INEQUALITY OF HOUSEHOLD INCOMES: A STATISTICAL APPROACH TO THE CREATION OF A DENSE AND CONSISTENT GLOBAL DATA SET

The deficiencies of the Deininger and Squire data set on household income inequality are well known to include sparse coverage, problematic measurements, and the combination of diverse data types into a single data set. Yet many studies have relied on this data due to the lack of available alternatives. In this paper we show how the UTIP-UNIDO measures of manufacturing pay inequality can be used, with other information, to estimate measures of household income inequality. We take advantage of the systematic relationship between the UTIP-UNIDO estimates and those of Deininger and Squire. The residuals from this exercise provide a map to problematic observations in the Deininger and Squire data, and the estimated coefficients provide a way to construct a new panel data set of estimated household income inequality. This new data set provides comparable and consistent measurements across space and through time.     

Income distribution, borrowing constraints and redistributive policies

This paper sheds light on the relationship between income inequality and redistributive policies and provides possible guidance in the specification of empirical tests of such a relationship. We model a two-period economy where capital markets are imperfect and agents vote over the level of taxation to finance redistributive policies that enhance future productivity. In this context, we show that the pivotal voter is not necessarily the agent (class) with median income. In particular, the poor, who are more likely to be liquidity constrained, may form a coalition with the rich and vote for low redistribution. The effects of an increase in income inequality on the level of redistribution turn out to depend on whether the increase in inequality is concentrated among the poor or the middle class. Empirical results from a panel of 22 OECD countries provide preliminary evidence consistent with our main theoretical implications.     

A refinement of the relationship between economic growth and income inequality

There is mixed evidence in the literature of a clear relationship between income inequality and economic growth. Most of that work has focused almost exclusively on developed economies. In what we believe to be a first effort, our emphasis is solely on developing economics, which we classify as high-income and low-income developing countries (HIDC and LIDC). We make such distinction on theoretical and empirical grounds. Empirically, the World Bank has classified developing economies in this manner since 1978. The data in our sample are also supportive of such classifications. We provide theoretical scaffolding that uses asymmetric credit constraints as a premise for separating developing economies in such a way. We find strong evidence of a negative relationship between income inequality and economic growth in LIDC to be in stark contrast with a positive inequality–growth relationship for HIDC. Both correlations are statistically significant across multiple econometric specifications. Using international data from 1960 to 2010, this article explores the effect of income inequality on economic growth using dynamic panel technique, such as system generalized method of moments (GMM) that is believed to mitigate endogenous problem. These results are strikingly contrasting to the previous estimation results of Forbes (2000) displaying significant positive correlation between two variables in the short to medium term.     

CAN GREATER ATTENTION TO WOMEN'S RIGHTS HELP ADDRESS INCOME INEQUALITY?

We investigate the relationship between women's economic, social, and political rights with the level of income inequality. We use dynamic panel estimation to check our hypothesis that that strong rights for women translate into higher participation in economic productive activities, improve income and education and support for future generations, thus reducing the overall income inequality in the economy. We further look at how a country's overall economic performance and the status of women's education alter the relationship. The relationship is strengthened if countries are either in the higher‐income spectrum or have higher levels of female educational attainment. (JEL O1, I00, H00)     

收入分配不平等、有效需求与经济增长——一个基于中国经济转型期的实证研究

本文从有效需求角度入手,探究中国经济转型期经济增长与收入分配不平等之间的关系,并运用中国1978-2005年间28个省市的面板数据,通过面板数据单位根检验、协整检验与误差修正模型,对中国经济增长与收入分配不平等、有效需求、劳动力、投资、教育以及收入分配不平等和有效需求交互影响之间的长期关系和短期关系进行了研究。结果显示,中国经济转型期经济增长与收入分配不平等、有效需求具有长期的均衡关系,收入分配不平等通过有效需求机制阻碍了经济增长,且在短期内效果也非常显著。     

Finance,income inequality and income redistribution

Using a panel fixed effects model for a large sample of countries covering 1975–2005, we test the hypothesis that income inequality caused by finance (financial development, financial liberalization and banking crises) is related to more income redistribution than inequality caused by other factors. Our results provide evidence in support of this hypothesis. We also find that the impact of inequality on redistribution is conditioned by ethno-linguistic fractionalization. Our findings are robust to the inclusion of several control variables suggested by previous studies.     

中国农村地区间居民收入差距及构成变化:1995—2008年——基于基尼系数的分解

本文采用分省的面板数据对农村地区间基尼系数分解结果表明,1995—2008年,中国农村地区间收入差距总体上仍然呈现上升趋势,基尼系数上升了0.0639,但增幅出现明显减弱趋势。基尼系数变化及农村居民工资性收入对基尼系数的贡献变化显示出与经济发展阶段变化一致的含义;结构性效应已不再是农村地区间收入差异的唯一构成来源,收入集中效应对基尼系数起了明显的增加作用,工资性收入的集中效应超过了其他收入来源。这些构成来源的变化蕴含着中国面临调节地区间农村收入差距的政策机遇。     

Political capitalism: The interaction between income inequality,economic freedom and democracy

We study the relationship between income inequality and economic freedom for a panel of 100 countries for the 1971–2010 period. Using a panel Granger non-causality approach, we reject the null hypothesis of Granger non-causality running from income inequality to economic freedom, but not vice versa. From a series of dynamic panel estimations we show that the effect of income inequality on economic freedom is negative and robust to the inclusion of additional controls. In particular, inequality is negatively associated with those components of economic freedom related to international trade, domestic market regulation as well as the rule of law and property rights protection. We argue that the negative effect of inequality on economic freedom is due to the economic elite converting its economic power into de facto political power to defend its economic interests; these interests run counter to economic freedom, discouraging innovation and competition as well as protecting the elite's rents. Finally, we show that economic freedom decreases with income inequality even in democratic countries, suggesting that democratic institutions do not prevent economic freedom from eroding. We argue that the latter finding corresponds to a system of political capitalism or captured democracy, where a powerful economic elite can nevertheless exercise de facto political power by cooperating with politicians and other decision-makers for their mutual benefit.     

UNIVERSAL ACCESS,PARALLEL TRADE AND INCENTIVES TO INNOVATE

Governments often subsidize poorer groups in society to ensure their access to new drugs. We analyse the optimal income‐based price subsidies in a strategic environment. We show that universal access is less likely to arise when price arbitrage prevents international price discrimination. When this is not the case, under some income ranges, bilateral universal coverage can be supported by equilibrium subsidies together with bilateral partial provision. In such a case, international health policy coordination becomes relevant. We also show that asymmetric universal access to medicines across countries can arise, even when countries are ex ante symmetric, when international price discrimination is possible and governments cannot design subsidies proportional to either income or quality.     

INCOME INEQUALITY IN GERMANY DURING THE 1980s AND 1990s

The paper estimates a variety of inequality measures for three sub-samples of the German population using cross-sectional data on equivalent income from the German Socio-Economic Panel (GSOEP). The sub-populations under consideration are residents of West Germany including foreigners for the years 1984 to 1996, residents of East Germany for the years 1990 to 1996 and a comprehensive German population for the years 1990 to 1996. Bootstrap methods are applied to test whether changes in inequality are statistically significant. In order to account for panel attrition and over-sampling, sample weights are incorporated into the estimation procedure. The empirical results confirm the relative stability of the West German income distribution. While income inequality in West Germany has generally not altered in an economically relevant way over the period 1985 to 1996, inequality in East Germany has increased after reunification. Despite this increase, inequality remains substantially higher in the western part of the country. Convergence of eastern mean income to the western level generally overcompensated the rise in inequality in East Germany, so that the level of inequality in unified Germany is lower in 1996 than in 1990.