New evidence on determinants of income inequality

Kwanho Shin, Donggyun Shin

Research output: Contribution to journalArticle

Abstract

This paper investigates determinants of income inequality. To refect that income distribution underwent structural changes recently, we analyze various inequality measures: the Gini coefficient, the Estimated Household Income Inequality (EHII) index, and the income share of the top 1 percent. Analysis of country-level panel data suggests that, contrary to the Kuznetz hypothesis, income inequality has worsened recently among developed countries, which is more evident in the income share of the top 1%. The apparent negative effects of trade openness on income inequality are explained by other control variables, and the negative impact of financial openness is observed when the top 1 percent is analyzed. Technological progress is positively associated with income inequality, as measured by the Gini or the top 1 percent, but not the EHII. It is also found that, while income inequality worsens in the degree to which individuals can participate in the political process of their country, it is reduced by expanded government expenditures.

Original languageEnglish
Pages (from-to)125-162
Number of pages38
JournalJournal of Economic Theory and Econometrics
Volume24
Issue number2
Publication statusPublished - 2013 Jun

Keywords

  • Financial openness
  • Income inequality
  • Technological progress
  • Trade openness

ASJC Scopus subject areas

  • Economics and Econometrics

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