This paper empirically analyses the factors affecting income inequality in 15 developed and developing economies over the period of 1996 to 2010. Evidence from a panel dataset using an OLS regression confirms the presence of the Kuznets’ inverted-U hypothesis for developed economies, indicating that there is a negative relationship between income per capita and income inequality. The relationship between the growth rate and income inequality, is also found to be negative. In relation to education, the paper finds a significant negative relationship between the education enrolment rate and income inequality, where the effect is greater in developing economies. Furthermore, the effects of government expenditure and trade on inequality are found to be insignificant for developing economies.
The determinants of income inequality varying from developed to developing countries, have intrigued economists over the decades, initiating them to conduct several studies on the topic. This paper examines the determinants of income inequality over a 15 year period between 1996 to 2010 in two specific regions; developed economies from Europe and developing economies with majority of them consisting of South American countries. This paper will cross-compare findings to distinguish correlations and differences between the two sets of countries.
As a result, this study will incorporate the Gini coefficient as the dependent variable. The purpose of using this measure is to determine the levels of income inequality between the two cohorts discussed above. Prior studies look into health and income inequality and use the Gini coefficient concentration index; this is evident in (Podder, 1995).
The main determinants of income inequality are GDP per capit...
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...lity when GDP per capita is higher than $2000. Barro’s paper also supported the Kuznets curve when looked across countries and over time, stating that it was a ‘clear empirical regularity’ that inequality decreases in the long run.
Other studies challenged the idea that inequality has a negative relationship with economic growth, notably the likes of Forbes (2000), who found a strong positive relation between the two variables. He used a panel data approach, focusing on 45 countries over a period of 30 years. Forbes’ study highlighted that in the short and medium run, an increase in income inequality had a strong positive effect on economic growth, thus increasing the gap between rich and poor individuals. However, he stated that due to insufficient long run data at the time of researching the paper, he was only able to focus on a short and medium term timescale.
Wealth inequality did not always exist in human life. In fact, “Human life have not only been changed, but revolutionized, within the past hundred years” (Carnegie 1). There used to be
Firebaugh, Glenn. "The Trend in Between-Nation Income Inequality." Annual Review of Sociology (2000): 323-352. online.
Another method of measuring inequality is through use of the Gini coefficient, it represents statistical dispersion of the income distribution of nations residents. The trends in Australia’s Gini coefficient are a fall from 0.329 in 2009-10 to 0.32 in 2011-12, thus illustrating a reduction in inequality due to tax cuts and increased welfare ...
America in today's society is burdened with many economic and political problems that have begun to plague the nation. Controversial topics are constantly being debated from sunrise to sunset across the country with supporters and those who oppose each bearing various levels of financial and political misfortune. With the numerous economic and political problems that affect the nation, the argument over the issue of income inequality is one of the most notable. Creating a political civil war, proponents from both sides have brought the issue into national view and debate has grown substantially within recent years.
Belsie, Laurent. “The Causes of Rising Income Inequality.”.N.p., 5 Mar. 2009. Web. 30 Apr. 2014
Krugman points out some alarming statistics in his New York Times article A report on inequality from the Congressional Budget Office
Income inequality in the United States has increased and decreased throughout history, but in the recent years, the widening gap has become a serious issue. Income inequality is usually measured by Gini coefficient. According to this method coefficient varies between 0 and 100; while 0 represents complete equality (income is distributed equally among all the population of the country), 100 represents complete inequality (only one person receives all the country’s income, while the rest of the population receives nothing). According to the Census of Bureau, the official Gini coefficient in the U.S. was 46.9 in 2010. This is way higher than the all-time low coefficient of 38.6 set in 1968 (qtd. in Babones).
Income inequality in the United States, as of 2007, has reached levels not seen since 1928. In 1928, the top one percent received nearly 24% of all income within the United States (Volscho & Kelly, 2012). This percentage fell to nearly nine percent in 1975, but has risen to 23.5% as of 2007 (Volscho & Kelly, 2012). Meanwhile, in 2007 (see
“A Guide to Statistics on Historical Trends in Income Inequality.” cbpp.org. Center on Budget and Policy Priorities, 2013. Web. 06 April. 2014. .
To illustrate the gap of income inequality we can begin with corruption. The effects of corruption not only affects the growth rate, but it also affect the income inequality too (Dincer and Gunlap). Nevertheless, corruption falls more on low income individuals. Why? According to Dincer and Gunlap, “Individuals who belong to low income groups pay a higher proportion of their income as bribes than the individuals who belong to high income groups,” (Dincer and Gunlap). In other words, people who have a lower income pay more money than higher income people in the social class. To go in deeper analysis, corruption has a tax system which favors the higher income individuals more t...
...ment, income inequality will exist due to the rise of some economically successful people and the further development of factors that push people into poverty. Although it may not seem fair that there are rich people blowing money on impractical and meaningless things while people live in poverty, it’s a reality that the United States has experienced for centuries.
It would be correct to say that global inequality and poverty is a serious issue for different nations. There have been cases that rich is becoming more rich and poor poorer. In the presentation, group has been able to make certain relevant questions about global inequality and poverty. It would be an alarming fact to state that half percent of the population controls more than 33 percent of world trade. The group has raised a pertinent question of relationship between inequality and poverty.
If income inequality continues to grow, the economy will break down. For example, if the housing price continues to rise because of the rich people, poor people will not have a place to live since they cannot afford to buy these expensive houses. When this happens, it will create another housing bubble because the houses are not worth buying, which means the market value of the house exceeds the house’s value; therefore, nobody will buy the house including the riches since they already have houses to live. Moreover, poor people do not believe they can get access to wealth because they cannot afford anything, and they cannot afford the tuition fees for a good education, which is the traditional route to success.
Stewart, Charles T., Jr. "Inequality of Wealth and Income in a Technologically Advanced Society." The Journal of Social, Political, and Economic Studies 27.4 (2002): 495-512. Print.
The Relationship between Globalization, Economic Growth and Income Inequality. (2010, January). TEMEP Discussion Paper. Retrieved from ftp://147.46.237.98/DP-51.pdf