Source Of Income Inequality

Income Inequality Growth and Income Distribution Most nations impose taxes to keep their country running and help the low earning citizens. It’s necessary to ensure the lower classes receive adequate education, health services and quality of life. However, recently, the lower classes are receiving less and less of the nation’s income while the top earners share is increasing. Why? If tax policy is in place to more equally distribute a nation’s income, why is income inequality increasing? The income inequality gap has been growing over the past few decades according to a study done by K. A. Bryan and L. Martinez. They not only recognize that the gap has been growing, but that lower income groups haven’t had a significant increase in inequality

Already recognizing that income inequality has been increasing over the years and the associated negative connotations that come with it, they wanted to breakdown sources of income inequality. This paper uses the March supplement U.S. Current Population Survey (CPS) data from 1994 to 2012 taken from the IPUMS-CPS to calculate the Gini coefficient. The Gini coefficient is as follows, G= ∑_(k=1)^K▒R_k G_k S_k. Where R_k is the Gini correlation between income source k and total income, G_k is the relative Gini of source k, S_kis source k’s share of total income, and k is the source of income. G is the Gini coefficient of total income inequality before the income change. This shows how changes in certain income sources will affect overall income inequality. The larger the coefficient, the more inequality. They found that the Gini coefficient had increased, with a strong correlation to earned income as a source. They also found that an increase in transfer income reduces income inequality most significantly among all income sources. The finally conclude that better training programs and education are required to increase the lower groups’ earned income and potentially remedy the increasing income

Factors such as corruption, unemployment, and education level? This study by Apergis, Dincer, and Payne looks for the relationship between these factors and income inequality in the short run and the long run. they based his study off a previous study finding a positive relationship between poverty and income inequality. Meaning that the more poverty in an area, the higher the income inequality. Payne used annual data from 1980 to 2004 for every state in the US. This study used data from the Bureau of Economic Analysis, the Bureau of Labor Statistics and the National Center for Education Statistics. They then performed a statistical t-test on every factor’s significance in determining poverty and income inequality. They found a significant impact on income inequality from the unemployment rate, level of education, real per capita personal income, and poverty. However, corruption was deemed to have an insignificant relationship with income inequality. This paper argues that instead of fighting income inequality, it would be more beneficial to fight poverty, therefore creating less income