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Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK’s pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under-coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.

Economic inequality is, nowadays, frequently perceived as following a growing trend with impact on political and religious agendas. However, there is a wide range of inequality measures, each of which pointing to a possibly different degree of inequality. Furthermore, regardless of the measure used, it only acknowledges the momentary population inequality, failing to capture the individuals evolution over time. In this paper, several inequality measures were analyzed in order to compare the typical single time instant degree of wealth inequality (population perspective) to the one obtained from the individuals’ wealth mean over several time instants (individuals perspective). The proposed generalization of a simple addictive model, for limited time average of individual’s wealth, allows us to verify that the typically used inequality measures for a given snapshot instant of the population significantly overestimate the individuals’ wealth inequality over time. Moreover, that is more extreme for the ratios than for the indices analyzed.

Using data on U.S. state-level inequality from Frank, Sommeiller, Price, and Saez (2016) and state-level unionization data from Hirsch et al. (2001), this paper shows that unions have a negative impact on income inequality in U.S. states. In particular, higher rates of unionization decreased inequality, as measured by the Gini coefficient, the share of income accruing to the top 1% of earners, and the share of income accruing to the top 10% of earners. The findings are robust across several estimation methods and also when union coverage is used as an alternative to the percent of workers in unions.

This study investigates the relationship between financial structure and income inequality in China and explores a channel for changes of financial structure to influence income inequality. Our res...

PurposeThe purpose of this paper is to investigate the nonlinear relationship between shadow economy and income inequality and determine whether the size of shadow economy can influence the level of income inequality.Design/methodology/approachBoth parametric (panel OLS) and nonparametric/semiparametric regression suggested by Robinson (1988) will be used to capture the dynamic nonlinear relationship between these variables using unbalanced panel data of 154 countries from 2000 to 2007. Additionally, the relationship between income inequality and shadow economy on both developed and developing countries will be analyzed and compared.FindingsFirst, semiparametric analysis and nonparametric analysis are significantly different than parametric analysis and better in nonlinear analysis between income inequality and shadow economy. Second, income inequality and shadow economy resemble an inverted-N relationship. Third, the relationship between income inequality and shadow economy is different in developed countries (OECD countries) and developing countries, where OECD countries have similar inverted-N relationship as before. However, for developing countries, income inequality and shadow economy show an inverted-U relationship, similar to the original Kuznets hypothesis.Practical implicationsThis study suggests that there is a possible trade-off between income inequality and shadow economy and helps policy makers in solving both problems effectively.Originality/valueDespite the growing importance of income inequality and shadow economy, literature linking the two variables is scarce. To the best of the authors’ knowledge, there is no literature that nonlinearly links these two variables. Furthermore, the dynamics of the relationship between these two variables in developed countries and developing countries will be explored as well.

We introduce firm and worker heterogeneity into a model of innovation†driven endogenous growth. Individuals who differ in ability sort into either a research activity or a manufacturing sector. Research projects generate new varieties of a differentiated product. Projects differ in quality and the resulting technologies differ in productivity. In both sectors, there is a complementarity between firm quality and worker ability. We study the co†determination of growth and income inequality in both the closed and open economy, as well as the spillover effects of policy in one country to outcomes in others.

This paper presents a simple post-Kaleckian model of distribution and growth that incorporates personal income inequality and interdependent social norms. The model shows in an easily accessible manner that macroeconomic effects of changes in personal and functional income distribution can potentially reinforce or dampen each other. The resulting variety of demand and growth regimes is due to different distributional effects on consumption demand. Therefore, the second part of the paper investigates the empirical relevance of the additional demand regimes by estimating aggregate consumption functions with variables for personal and functional income distribution for the United States and Germany. We find similar effects of functional income distribution for both countries. However, for the US, we find positive long-run effects of personal income inequality on consumption. The effect is strongest for the top 10% income share and the Gini index and less strong for the top 5% and 1% income shares. While this is evidence for relative consumption patterns, it also supports the view that the ?super rich? are a relatively distant class for most people - questioning the notion of expenditure cascades from the very top to the very bottom. In contrast, for Germany we fail to find compelling evidence for effects of personal income distribution.

Inequality's effect on growth remains elusive, largely due to endogeneity, complex interactions, and lead–lag relationships. We revisit this issue by examining the four main channels through which inequality transmits to growth: savings, investment, education, and knowledge production. We construct new panel data for 21 OECD countries spanning 142 years. External communist influence is used as a new time-varying instrument for inequality and the effects of inequality on the outcome variables are made conditional on the stage of financial development. Our results show that inequality hampers growth at low to moderate levels of financial development but has little effect on growth at advanced levels of financial development.

We test whether income inequality undermines female and male life expectancy in the United States. We employ data for all 50 states and the District of Columbia and two-way fixed effects to model state-level average life expectancy as a function of multiple income inequality measures and time-varying characteristics. We find that state-level income inequality is inversely associated with female and male life expectancy. We observe this general pattern across four measures of income inequality and under the rigorous conditions of state-specific and year-specific fixed effects. If income inequality undermines life expectancy, redistribution policies could actually improve the health of states.

Recently the expansion of urban-rural income inequality and the rapid growth of fossil-energy consumption have become two significant challenges China should address to achieve its ambitious goals. For the first time, this study uses the Chinese provincial panel data during the period of 1996–2013 to perform a quantitative analysis on the relationship between the urban-rural income gap and the per capita electricity consumption. Fully considering the potential endogeneity problem, this paper uses the orthogonal-difference Generalized Method of Moments (GMM) as the benchmark estimation method. To ensure the robustness of the estimations, the Theil index and per capita urban-rural income are utilized to measure the urban-rural income gap. The estimation results indicate that the influences of urban-rural income inequality on electricity depend on the income level. At the current stage of economic development, the income disparity has significantly negative impacts on provincial per capita electricity consumption. Moreover, there is also strong evidence for the existence of the inverted U-shaped relationship between per capita electricity consumption and GDP per capita. Furthermore, other economic and social factors, including the enhancement of urbanization and industrialization levels, the adjustment of the population structure, and the development of import-export trade may also promote electricity consumption.

In this article, we consider a stylized dynamic model to describe the economics of a population, expressed by a Langevin-type kinetic equation. The dynamics is defined by a combination of terms, one of which represents monetary exchanges between individuals mutually engaged in trade, while the uncertainty in barter (trade exchange) is modelled through additive and multiplicative stochastic terms which necessarily abide dynamical constraints. The model is studied to estimate three meaningful quantities, the inequality Gini index, the social mobility and the total income of the population. In particular, we investigate the time evolving binary correlations between any two of these quantities.

This paper studies the relationship between income distribution and international integration in a canonical trade setting with one change. In the standard model prices are solely a function of (constant) marginal costs and (constant) elasticities, implying that information on individual incomes are of no value to a firm. To allow a more realistic role for consumer level information, a firm's strategy space is expanded to include non-linear prices. Now profit maximizing firms use information on income distribution to design a product for each income class and set prices to induce each group to optimally select the appropriate option. Equilibrium involves designs below the first best for low income groups and above the first best for high income groups – welfare differences are more exaggerated than income differences. When countries with differing income distributions integrate this has implications for the size of these distortions, influencing the gains from trade both within and across countries. These implications are quantified and shown to be potentially significant factors affecting welfare outcomes from integration – with the consequences more pronounced at lower trade costs. The structure of trade and expenditure patterns that emerge also match a range of empirical findings. These results are driven by firm strategy based on income difference alone as preferences are assumed to be identical and homothetic across countries, placing the distribution of income at the center of the analysis.

This paper presents new results on the relationship between income inequality and education expansion—that is, increasing average years of schooling and reducing inequality of schooling. When dynamic panel estimation techniques are used to address issues of persistence and endogeneity, we find a large, positive, statistically significant and stable relationship between inequality of schooling and income inequality, especially in emerging and developing economies and among older age cohorts. The relationship between income inequality and average years of schooling is positive, consistent with constant or increasing returns to additional years of schooling. While this positive relationship is small and not always statistically significant, we find a statistically significant negative relationship with years of schooling of younger cohorts. Statistical tests indicate that our dynamic estimators are consistent and that our identifying instruments are valid. Policy simulations suggest that education expansion will continue to be inequality reducing. This role will diminish as countries develop, but it could be enhanced through a stronger focus on reducing inequality in the quality of education.

PurposeWhen the policy maker contemplates the current aggregate demand (AD), she/he does so given implicitly the current state of income inequality. And, policy goals should be set based on the distance between this demand and some “optimal” AD from the viewpoint of optimal income inequality. The purpose of this paper is to relate this policy concern to the sources of modern inequality.Design/methodology/approachTo characterize optimality, recent research in inequality reveals that paternalistic inheritance is the decisive source of it. Inequality is the outcome of an intergenerational externality according to which the current entrepreneurs (physical-capital formation agents) bequeath to descendants who use the inheritance as rentiers rather than as entrepreneurs. Several policy measures have been proposed to correct for this externality. Yet, it is found that if the “dynastic” character of inequality is disregarded, the distance between actual and optimal AD will be ever increasing.FindingsPolicy should be addressing the motive of the descendants to act as rentiers, which is found to be easy to attain once the policy maker adopts a natural-resource view of sizeable inheritance and proceeds to reassign property rights over it across generations.Originality/valueOptimality is identified with the Cantorian (total) ordering of the social economy, which is inhibited by the institution of dynastic property rights. One way to deal with this problem is to view inheritance as a depletable natural resource.

The present paper shows the results of an empirical study to prove that income inequality has increased over the past decades. To conduct the study, an income inequality dataset containing 133 countries over the 1990-2014 period was created. The results indicate that globally, income inequality (population-weighted Gini coefficients), on average, increased from 38.6 to 41.8 during that period. They further show the existence of variations in the level of income inequality across regions and groups of countries. The reduction in income inequality, among others, remains one of the key challenges associated with the 2030 Agenda for Sustainable Development. Therefore, in this paper, various transmission mechanisms and drivers of the increasing level of income inequality are identified and possible forward-looking development policies to reduce income inequality are given.

Cross-national and longitudinal studies have previously shown mixed results on income inequality and life satisfaction, as income inequality is associated with other social trends that may affect life satisfaction differentially. This article examines the impact of income inequality on subjective wellbeing in China, where sharply rising inequality has been accompanied by rapid economic growth over the past decades. Based on a series of Chinese General Social Survey (CGSS) data, we show that life satisfaction increased from 2003 to 2010, despite a dramatic rise in income inequality during the same period. Cross-sectional analysis of the CGSS in 2005, matched with prefectural-level statistics, reveals that the local economic growth rate has a positive effect, but local income inequality has a negative effect, on individuals’ life satisfaction. Provincial panel data analysis further confirms the negative effect of income inequality on life satisfaction at the aggregate level. Our findings help to clarify the mixed results in previous studies and point to the importance of both economic and social policies in improving subjective well-being in China’s transitional economy.

Trust is a good approach to explain the functioning of markets, institutions or society as a whole. It is a key element in almost every commercial transaction over time and might be one of the main explanations of economic success and development. Trust diminishes the more we perceive others to have economically different living realities. In most of the relevant contributions, scholars have taken a macro perspective on the inequality-trust linkage, with an aggregation of both trust and inequality on a country level. However, patterns of within-country inequality and possibly influential determinants, such as perception and socioeconomic reference, remained undetected. This paper offers the opportunity to look at the interplay between inequality and trust at a more refined level. A measure of (generalized) trust emerges from ESS 5 survey which asks "...generally speaking, would you say that most people can be trusted, or that you can't be too careful in dealing with people?". With the use of 2009 EU-SILC data, measurements of income inequality are developed for age-specific groups of society in 22 countries. A sizable variation in inequality measures can be noticed. Even in low inequality countries, like Sweden, income imbalances within certain age groups have the potential to undermine social trust.

We analyze the effects of macroeconomic fluctuations, as well as episodes of financial instability and inflation, on inequality indicators in Chile for the period 1960-2014. The relationship between episodes of crisis and fluctuations on levels of inequality are estimated from an event study, finding that they are related to fluctuations in inequality. In addition, we perform econometric estimates where inequality indicators relate to different macroeconomic variables and educational performance. The main conclusions are that banking and inflation crises, as well as periods of severe cyclical contractions, tend to increase the levels of inequality in Chile.

This paper examines how the relative shares of public and private health expenditures impact income inequality. We study a two period overlapping generation's growth model in which longevity is determined by both private and public health expenditure and human capital is the engine of growth. Increased investment in health, reduces mortality, raises return to education and affects income inequality. In such a framework we show that the cross-section earnings inequality is non-decreasing in the private share of health expenditure. We test this prediction empirically using a variable that proxies for the relative intensity of investments (private versus public) using vaccination data from the National Sample Survey Organization for 76 regions in India in the year 1986–87. We link this with region-specific expenditure inequality data for the period 1987–2012. Our empirical findings, though focused on a specific health investment (vaccines), suggest that an increase in the share of the privately provided health care results in higher inequality.

We derive a simple formula for the social discount rate (SDR) that uses the median, rather than average agent of the economy to reflect the consequences of consumption growth on income inequality. Under reasonable assumptions, the difference between the growth of median and mean incomes is used to adjust the wealth-effect in the standard Ramsey rule. In a plausible special case the representative agent has the median income. With inequality aversion elasticity of 2 (1.5, 1), the U.K. and U.S. SDR would be 1% (0.5%, 0.25%) lower than the standard Ramsey rule. This reflects two decades of inequality-increasing growth and implies greater weight placed on future generations in public appraisal.

This paper discusses the role of institutions and structural change in shaping income inequality. It is argued that while social expenditure and direct redistribution are crucial for improving income distribution, sustainable equality requires structural change. The relative importance of these variables in different countries is analyzed and a typology suggested. It is argued that the most equal countries in the world combine strong institutions in favor of redistribution and knowledge-intensive production structures that sustain growth and employment in the long run. Both institutions and the production structure in Latin America fail to foster equality and this explains its extremely high levels of inequality. The paper presents empirical evidence that supports this view, based on a sample of developed and developing countries for the period 1990-2010. Institutions for redistribution are captured through social expenditures as a percentage of GDP, while the role of structural change is captured by indicators of the technological intensity of production and the evolution of labor productivity. The technological intensity of the production structure is proxied through two indicators, the Economic Complexity Index and the ECLAC Index of Technological Intensity. RESUMO Este artigo discute o papel das instituições e das mudanças estruturais sobre a desigualdade de renda. Argumenta-se que enquanto o gasto social e a transferência de renda são fatores cruciais à melhora da distribuição de renda, a continuidade desse processo depende de mudanças estruturais. A importância relativa dessas variáveis em diferentes países é avaliada e uma tipologia é sugerida. Argumenta-se que os países mais igualitários combinam instituições em favor da redistribuição e estruturas produtivas intensivas em conhecimento. Na América Latina, instituições e estrutura produtiva falham em promover a igualdade, o que explica seus elevados níveis de desigualdade. Baseado em uma amostra de países em desenvolvimento e desenvolvidos para o período 1990-2010, este artigo apresenta evidência empírica que suporta este argumento. Instituições que favorecem a distribuição são medidas pelo gasto social como uma porcentagem do PIB, enquanto o papel da estrutura produtiva é medido por indicadores de intensidade tecnológica e pela evolução da produtividade do trabalho. A intensidade tecnológica, por sua vez, é capturada por dois indicadores: o Índice de Complexidade Econômica e o Índice de Intensidade Tecnológica da CEPAL.

Based on a substantially larger data set (in both regional and temporal coverage) than the existing literature, we investigate the theoretically ambiguous link between income inequality and per capita emissions using cross-country panel data. We find that the relationship depends on the level of income. Using an arguably superior group-fixed effects estimator, we show that for low and middle-income economies, higher income inequality is associated with lower carbon emissions while in upper middle-income and high-income economies, higher income inequality increases per capita emissions. The result is robust to the inclusion of plausible transmission variables as well as different data sources or aggregations.

How does rising income inequality affect individual attitudes toward international trade? While there exists a plethora of studies on the interlinkages between international trade and income inequality, the existing literature on individual trade policy preferences has not considered the role of inequality in shaping public opinion about international trade. By bringing these two separate strands of literature together, this study examines whether citizens associate income disparities with trade liberalization and, if so, how this linkage affects their attitudes toward international trade. Using data from a population-based survey-embedded experiment, this study identifies two key findings. First, individuals draw a link between skewed income distribution trends and international trade. Second, the perceived linkage between rising income inequality and trade liberalization is disconnected from the formation of trade policy preferences. These findings suggest that the association between rising income inequality and trade liberalization does not automatically lead citizens to endorse protectionist trade measures not because they are ignorant about the distributional effects of international trade. Rather, citizens fail to connect income inequality to foreign trade policy, because they may not perceive trade-induced inequality as unfair.

The article delineates the main methodological deficiencies and datasets available for comparing income inequality at the European and world level. The article is divided in two parts. In the first part of the article, I present the main datasets and methodological deficiencies when trying to compare income inequality in the world. Although efforts have been made in the last decades to generate comparative databases, the qualities of some indicators are rather doubtful and also there is no common ground on conceptualizing inequality indicators and measuring them, some of which are income-based, while others are household expenditure-based. Then, I present two classical studies on studying income inequality after the Washington consensus. In the second part of the article I sketch an overview of rising income inequality in Romania after 1989 by presenting some income inequality indicators and comparing them with other former CEE countries. However, I will pinpoint that Romania’s case is rather exceptional in the EU and, when comparing standard income inequality indicators, further explication needs to be delivered. I conclude that while income inequality is the result of macro-structural changes that occurred during the transition to market capitalism, political decisions are not to be played-down.

This study investigates the relationship between growth, inequality and poverty in a panel of 42 sub-Saharan African countries by using the latest 13 household surveys, during the period of 1981–2012. The study proposed a relatively new concept of pro-poor growth, which includes both the linear and non-linear growth components in a cross-sectional time series data, called ‘Pro-equality Growth Index (PeGI)’. The results confirm the ‘negative-linear’, ‘inverted U-shaped’, and ‘negative asymptotic U-shaped’ relationship between mean survey income and inequality in different model specifications. PeGI confirms the pro-equality growth process during 1984–1987 and 1996–1999 while remaining growth phases confirm the ‘anti-equality’ growth.

This article explores whether the places where people live—and specifically the diversity of incomes where people live—influence views about income inequality. Using a unique survey of New York City that contains geographic identifiers and questions about attitudes toward inequality, coupled with a rich array of Census data, we assess the degree to which the income diversity within spatially customized neighborhood boundaries influences beliefs about inequality. We find consistent evidence that attitudes about inequality are influenced by the places where people live—those who are exposed to more income diversity near their homes perceive larger gaps between the rich and everybody else, and are more likely to believe that the gap should be smaller. Moreover, this effect appears to be especially pronounced among those with lower educational attainment and at either end of the income spectrum.

As countries develop the percentage of population living in urban areas tends to increase. As this happens, inequality is expected first to increase and then to decline in what is known as the Kuznets inverted-U. But the literature has not paid much attention to differences in the absolute size of cities potentially affecting economy-wide inequality. Building on insights from the urban economics literature, this paper studies the relationship between the size and distribution of cities and income inequality at country level. Results show that beyond Kuznets’ hypothesis there is a U-shaped relationship between average city size and inequality; inequality first falls and then increases with average city size. This result is robust to a long list of controls, different estimation techniques, and identification strategies.

This paper investigates the relationship between different religious groups and income inequality. In particular, we examine whether different religious groups (Christianity, Islam, Judaism and Buddhism) have an impact on income inequality in a global perspective. Furthermore, this paper also sheds light on the effects of major religious sub-groups (Christianity and Islam) on income inequality. Using data for 130 countries from 1970 to 2013, we estimate a panel data model, controlling for religious beliefs, savings rate, arable land rate and age-dependency ratio. Our results indicate that religion plays an important role in explaining income inequality. In particular, we found that Islam and Judaism reduce income inequality while in general, Christianity and Buddhism increases inequality. However, the effects from sub-groups of Christianity on inequality are mixed; in particular, Anglican and Orthodox significantly reduce inequality while the effect from Catholic and Protestant is opposite. These findings are robust to different measures of inequality and alternative estimation techniques that take care of endogeneity.

The objective of this paper is to identify the determinants of the increase in income inequality that OECD countries have experienced over the past two decades. My hypothesis is that along with the financialisation of economies that has taken place since 1990, inequality increased because labour flexibility intensified, labour market institutions weakened as trade unions lost power, and public social spending started to retrench and did not compensate for the vulnerabilities created by the globalisation process. Using data from 25 high-income OECD countries from 1990 to 2013, I empirically evaluate this hypothesis. My results clearly suggest that the increase in inequality over the past two decades is caused by an increase in financialisation, a deepening of labour flexibility, the weakening of trade unions and the retrenchment of the welfare state.

On the assumption that wages do not adjust fully to inflationary effects of currency depreciation, a depreciation could shift income from workers to producers which could worsen income inequality. When we tested this hypothesis using a standard linear ARDL model, we found no long-run support for the hypothesis in any of the 51 states of the U.S. However, when we applied recent advances in formulating nonlinearity and introduced nonlinear adjustment of the real effective exchange rate of the dollar, we found significant short-run and long-run asymmetric effects in almost half of the 51 states. In most states, dollar depreciation was found to have un-equalizing effects on income inequality, consistent with theory.

Since the beginning of 21st century, China has experienced increasing aggregate saving rates as well as increasing income inequality simultaneously. In this paper, we explore the possible linkage between rising saving rates and rising income inequality. We first characterize China’s saving behavior using household survey data, finding that households with high income save at higher rates. We then derive analytically that the saving rate relates with income inequality index in a nonlinear way, in particular, the aggregate saving rate is a linear function of interaction term of the average income level and squared income inequality indicator, and the level value of average income. We conduct median regression analysis using community level data, finding that aggregate saving rates are increasing in income inequality, in particular, the higher the income inequality, the greater the marginal effect of income inequality on aggregate saving rates. This research has policy implication that the effective way to promote China’s domestic demand is through promoting a more equal distribution of income.

In this paper we compute inequality measures over the distribution of a subjective well-being variable constructed from a life satisfaction question included in the Gallup World Poll in almost all countries in the world. We argue that inequality in subjective well-being may be a better proxy for the degree of unfairness in a society than income inequality. We find evidence that inequality in subjective well-being has an inverse-U relationship with per capita GDP, but it is monotonically decreasing with respect to mean subjective well-being. We argue that this difference might be associated to inequality aversion in the space of utility. Fil: Gluzmann, Pablo Alfredo. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - La Plata; Argentina. Universidad Nacional de La Plata; Argentina Fil: Gasparini, Leonardo Carlos. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - La Plata; Argentina. Universidad Nacional de La Plata; Argentina

The paper empirically investigates the impact of natural resource abundance, in particular oil, on income disparities. It employs common correlated effects pooled mean group methodology for estimation to account for the cross-country heterogeneity and cross-section dependence in the oil-inequality nexus. In a sample of developed and developing countries, we find that oil abundance as well as oil dependence reduce income inequality. This inequality-reducing effect is highly likely to operate from better education attainments and improved health status due to oil booms.

Recently, income inequality has been rising in many parts of the world. This is creating some serious concerns among policymakers, as higher levels of income inequality can lead to various social ills. However, little is known about the role of historical factors in explaining the current level of inequality. I use the model of Durlauf (1996) as reference to create an econometric model to estimate this impact. Using current and historical data of US states, I find that illiteracy rate in 1920 has a strong positive influence on current level of inequality. The simulation results show that eliminating illiteracy in 1920 would have reduced contemporaneous inequality by 1-5 percent. Higher illiteracy indicates a lower level of human capital, and that can affect income distribution. Through the intergenerational transmission of income, this income distribution is exacerbated in the future, leading to higher levels of inequality.

There has been an increasing interest in the level and change in income inequality across much of the developed world. In Australia, this research has extended our knowledge by using new measures (for example wealth), longer time periods, and income inequality dynamics. One area for which we have relatively little recent evidence is on the spatial distribution of income inequality, especially at small areas of geography. Specifically, we look at the level of income inequality for the eight Australian capital cities in 2006 and 2011 (using relevant Census and survey data), as well as inequality between and within suburbs within those capital cities. A number of interesting findings emerge from the analysis. The most obvious finding is that there are differences across cities in the extent to which income is unevenly distributed. While this has been demonstrated in previous research, we were able to use new data and new techniques to show that the type of income which one uses has a small but noticeable effect on the spatial distribution of inequality. Differences in household sizes and the tax system change how income inequality is spatially distributed.

Research Summary We reexamine and explore the modern view of inequality against entrepreneurial market process theories, which leads us to three key assertions. First, we question the validity of income inequality as a proxy for true inequality (i.e., inequality of individual well-being), observing nonlinearity between the two constructs. Second, we explore the entrepreneurial microfoundations of growing and shrinking inequality in market societies, arguing that individual inequality is primarily the outcome of abnormal gains from disequilibrating creative destructive processes. These shifts are temporary, however, as equilibrating (arbitraging) entrepreneurship competes away monopoly profits. Growing inequality trends, then, are seen primarily as the result of increasingly large, but also shorter, waves of creative destruction. Finally, we reconsider the issue of the injustice of inequality through this market process lens. Managerial summary We contribute three arguments to the debate over economic inequality. We are (or ought to be) concerned over differences in individual well-being, not income. Studies of income inequality can be misleading. We argue that a key and so far overlooked source of economic inequality is entrepreneurship. Disruptive entrepreneurship (via innovation) redistributes economic resources away from the present industry, reallocating them in a more unequal redistribution, with the successful disruptor capturing an unequal share of resources. Imitative entrepreneurship, however, tends to mitigate this inequality, competing away abnormal profits while expanding new products’ diffusion among consumers. Finally, we observe that economic inequality may not be as unjust as previously thought, and we caution against corrective policy that might inhibit entrepreneurship.

We use data envelopment analysis to measure the relative efficiency among Indonesia’s provinces in using input to produce output over a 20-year period that includes the global economic crisis. We then employ the inequality decomposition technique of a Theil’s second measure to explore the extent to which the efficiency factor contributes to interprovincial income inequality. Our efficiency analysis reveals that most Indonesian provinces improved their relative inefficiency considerably in both resource utilization and allocation. Moreover, the relative inefficiency became convergent across provinces for the period. However, several provinces with serious pure technical and scale inefficiencies still exist in 2010. The province of Yogyakarta critically underperformed in resource utilization, and Central Kalimantan and Papua operate at further suboptimum scales. The former needs to develop appropriate mechanisms to efficiently use its given resources, while the latter need to mitigate business-unfriendly regulations and deal with financial constraints. The inequality decomposition analysis shows that interprovincial convergence of inequality in overall technical inefficiency largely contributed to the reduction in income inequality. The convergence of inequality in resource utilization inefficiency had a greater impact on inequality convergence in overall technical inefficiency than in resource allocation inefficiency. In 2010, pure labor productivity became a substantial new factor in determining income inequality. Since this measure is affected by per capita physical and human capital and technology, the spatial allocation imbalance of these factors has become a new concern in Indonesia.

International audience; This article combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pretax and posttax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pretax real national income per adult has increased 60% from 1980 to 2014, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pretax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults, but the share of women falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% in 2014.

The aim of this paper is to contribute both theoretically and empirically to the analysis of Inequality of Opportunity over time, providing some significant findings referred to the Spanish case. The analysis is carried out using microdata collected by the European Union Statistics on Income and Living Conditions (EU-SILC), which incorporate a wide variety of personal harmonised variables, allowing comparability with other countries. The availability of this database for the period 2004 and 2010 is particularly relevant for assessing changes over time in the main inequality indices and the contribution of circumstances to inequality of opportunity. We find that the effect of circumstances on income distribution has significantly intensified between the two years. To test the significance of the differences between years we perform bootstrap estimations.

Purpose The purpose of this paper is to propose the application of Gini, Theil and concentration indices for measuring inequality in water usage. Design/methodology/approach Gini coefficients and Theil indices have been used to estimate the overall inequality in domestic water use in a sample of 30 countries around the world. Along with Theil’s L (unweighted) index, liters per capita per day and gross national income weighted Theil index have also been estimated. Theil indices have been further disintegrated into within- and between-group inequalities. Concentration curve is also constructed to study the inequality in water use in accordance to the countries’ economic standing. Findings Domestic water use is high among the well-off countries considered in the study. Also, the Theil indices indicate that between group inequality contributes more to the overall inequality. It is observed that Theil indices, which consider only per capita water usage and can be decomposed, give a better insight into the existing inequality. Practical implications Different approaches were used to quantify inequality. The choice of index depends on the context of the study. The proposed approaches can contribute to planning of sustainable water management and development policies. Originality/value There is a dearth of metrics for quantifying inequality in water access or use. The study presents the application of indices, widely used in quantifying inequality in access to other resources such as income and energy, in assessing water inequality.

Scholars have studied the relationship between inward foreign direct investment (FDI) and within-country income inequality in cross-national contexts, but have not empirically investigated how FDI in different sectors might affect inequality in different ways. We use error correction models to analyze sectoral FDI data compiled from UNCTAD investment reports in 60 middle-income countries from 1989 to 2010, arguing that FDI in services is more likely to be associated with inequality than FDI in other sectors. We argue that skill biases and changes in employment patterns associated with service sector investments can help explain these findings.

This research aims to analyze the effect of economic growth on income inequality, labor absorption and economic welfare in Indonesian provinces. A 165 observations of panel data was analyzed using path analysis. The result showed that the economic growth has significant negative effect on income inequality in Indonesian provinces but it has no significant effect on both labor absorption and economic welfare. The labor absorption has significant positive effect on income inequality even though it has no significant effect on economic welfare. In addition, the economic welfare is not significantly influenced by the income inequality.

This study examines whether changing economic structure, social conditions, and financialization are responsible for increased income inequality in Indonesia. By employing panel data of 32 provinces in Indonesia that spans from 2007 to 2013, it finds that structural change affects income inequality, increased share of finance reduces inequality, which is against the financialization hypothesis, and social conditions have expected effects on income inequality. While an increased share of both agriculture and service sectors tends to reduce inequality, an increased share of manufacture sector has no effect on inequality. This study finds that falling poverty increases inequality, implying that policy to reduce poverty might not be neutral for inequality and instead cannot prevent it from increasing. Since the higher the college participation rate the higher income inequality tends to be, it does not automatically imply that in order to reduce inequality we need to reduce the number of people who go to college. It might be the case that the college participation rate has not reached a turning point, below which its increase increases inequality, but beyond which its increases reduces inequality.

This study performs a long-run, inter-temporal analysis of income inequality in the US spanning the period 1916–2012. We employ both descriptive analysis and the Threshold-Minimum Dominating Set methodology from Graph Theory, to examine the evolution of inequality through time. In doing so, we use two alternative measures of inequality: the Top 1% share of income and the Gini coefficient. This provides new insight on the literature of income inequality across the US states. Several empirical findings emerge. First, a heterogeneous evolution of inequality exists across the four focal sub-periods. Second, the results differ between the inequality measures examined. Finally, we identify groups of similarly behaving states in terms of inequality. The US authorities can use these findings to identify inequality trends and innovations and/or examples to investigate the causes of inequality within the US and implement appropriate policies.

This paper considers the political economy of financial development in an overlapping generations model that incorporates credit market imperfections, and shows that income inequality is a determinant of financial and economic development. Individuals have an opportunity to start an investment project at a fixed cost, but their income to finance the cost is unequal. The government proposes a policy financed by taxation that mitigates credit market imperfections, the implementation of which is determined through majority voting. The policy benefits middle-income individuals who can start the investment only after the implementation of the policy. The policy is, however, against the interest of the rich who wish to block such new entry, and that of the poor who wish to avoid the tax burden. Whether the policy obtains majority support depends on income inequality. High income inequality makes the policy hard to implement, which causes financial and economic underdevelopment.

This article is a discussion of how to measure urban inequality using the results of large household samples. It has two aims. The first is to de-mystify the methods of measuring earnings inequality by discussing their logic and their results in plain language that is suitable for a non-specialist audience. The second is to persuade the reader that such surveys can be suitable for measuring income derived from all kinds of livelihood strategies, including informal sector activities. The results show persistently high levels of inequality over time among income earners on the Copperbelt. Disaggregation of the employed workforce by major occupational groups reveals increasingly more elementary and middle-income workers than higher income managers, professionals, and technicians. This pattern differs by gender, however, with only women experiencing a marked increase in low-skill, low-wage employment.

The study examines the effects of declining forest resources on income inequality and poverty among indigenous people and the impact of forest-related income supplements. We conducted surveys and u...

This paper builds upon the EU2020 strategy, following the smart and inclusive growth paradigm, that treats human capital as a central component of regional development. However, there are cases of smart growth policies, focusing on skills’ empowerment, which may not yield the expected results, in terms of social cohesion aspects. Given this fact, the role of regional specificities, such as the extent to which an economy is characterized by a knowledge-based structure, constitute essential parameters that need to be taken into consideration during a policy-design process. This study aims to provide an evidence-based sub-regional analysis to assist processes regarding place-based policy design for socio-economic inclusion, in the case of Greece. More specifically, it investigates the links between education and income inequality, at a municipal level during the period 1994–2012, using a balanced panel dataset. The results indicate a negative effect of educational level on the formation of income inequality, probably due to the lack of an advanced knowledge-based economic structure in the case of the Greek economy. The significance of incorporating local particularities in the analysis, such as human capital endowments and time-varying socio-economic disturbances, as the 2008 economic crisis, is also stressed. Finally, the econometric method used in this paper includes the development of a DSEM model estimated by a system GMM estimator.

Previous research shows that when changes in national commodity and income tax rates affect labor supply decisions differently, relative rates can be altered to increase welfare. In the U.S., 40 states impose both a sales and income tax; however, the reliance varies widely. This paper uses a computable general equilibrium model to examine tax policy changes in Colorado. The findings suggest that the revenue neutral changes to income and sales tax rates can affect both the level of economic activity and the distribution of income. When labor force participation is highly sensitive to income tax rate changes—which this paper suggests is the case—progressive changes to Colorado's tax policy changes can both reduce inequality and increase output and employment.