...3. Economic growth is arguably a very important factor to eliminate poverty or reduce inequality. However, along with the creation of jobs and reduction in poverty, there has been evidence that suggests this is not always the case. E.g. Both China and India have witnessed widening inequality as their growth rates picked up over the 1990s (Department for International development). Economic growth will only reduce poverty if the wages of the lowest paid workers rise faster than the average wage rate and the growth increases job opportunities, which reduces unemployment levels, alongside a few more factors. Also, if everyone benefits and there is pro-poor growth, then EG will reduce poverty, which the Kuznets Curve demonstrates. This states that...
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...Income inequality is one of the big issues in 21st century. Unequal distribution of income in society is considered to be an obstacle to economic growth. The income allocation of a country’s population can be measured by a Gini coefficient. The value of Gini coefficient can be between 0 and 1 and used to define the income gap between the rich and the poor. The value 0 shows perfect equality and value 1 illustrates perfect inequality. The US can be an example of country with high income inequality. The US Gini coefficient has risen by 20% between 1979 and 2010 (Frizell, 2014). Factors like family structure (i.e. how many earners are there in family), technology (i.e. changes the way that we live), and immigration (i.e. changes the supply of...
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...Wealth Inequality in U.S. and Economic Efficiency Over the last decade, income inequality has become one of the most important issues in the U.S. and a subject of a lot of debate. There is a prevalent idea in the society that the wealth inequality in United States is currently at the highest level in the history after steadily raising for a number of decades. The financial crisis is said to have contributed to this significant gap between the top 1% and everybody else. People view it as an inherently negative thing, and fight hard to promote the equality and income redistribution. This paper examines the causes of inequality; the relationship between wealth inequality and economic growth and the hypothesis on how policy measures can be designed to mitigage the income disparity both in U.S. and in the rest of the world. The researh is based on the theory that inequality is an essential aspect of an efficient free market economy that adversely affects economic growth when in excess. When it comes to global wealth inequality, people often tend to accuse capitalism. In fact, the real laissez-faire capitalism doesn't exist anywhere on our planet. According to its definition, laissez faire is "an economic system in which transactions between private parties are free from intrusive government restrictions, tariffs, and subsidies, with only enough regulations to protect property rights." It has been previously proven free markets lead to the most efficient use of economic resources...
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...Lane Kenworthy in Chapter Two of his book, Jobs with Equality, lays out a various reasons why one should care about inequality. Kensworth, however, spends a bulk of the chapter discussing the results of inequality based on some data in addition to a host of speculative ideas that should make the reader more interested and focused on inequality in their society. The excerpt does focus heavily on the lowest income brackets in society making the distinction between poverty and inequality difficult to identify. While he demonstrates through survey data that people are concerned about inequality, his findings support the notion that individuals should care about low equality because as the top earners have gotten wealthier, the percent of the population in poverty. Kenworthy struggles to put forward an argument that shows how greater inequality is detrimental to economic growth. Kenworthy write that, “ high levels of inequality may be viewed by those at the middle and bottom of the income distribution as excessively unfair, thereby reducing worker motivation and workplace cooperation” (16). While this statement may sound like a plausible effect of high inequality, Kenworthy is only speculating and not supporting his statement with specific data. Could it be possible that due to inequality those in the lower classes have a greater incentive to work because they know that if they receive a promotion, their salary will grow substantially? This variable would also be quite difficult...
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...Inequality and Growth in a Panel of Countries* Robert J. Barro, Harvard University June 1999 Abstract Evidence from a broad panel of countries shows little overall relation between income inequality and rates of growth and investment. However, for growth, higher inequality tends to retard growth in poor countries and encourage growth in richer places. The Kuznets curve—whereby inequality first increases and later decreases during the process of economic development—emerges as a clear empirical regularity. However, this relation does not explain the bulk of variations in inequality across countries or over time. *This research has been supported by a grant from the National Science Foundation. An earlier version of this paper was presented at a conference at the American Enterprise Institute. I am grateful for excellent research assistance from Silvana Tenreyro and for comments from Paul Collier, Bill Easterly, Jong-Wha Lee, Mattias Lundberg, Francisco Rodriguez, Heng-fu Zou, and participants of a seminar at the World Bank. 2 A substantial literature analyzes the effects of income inequality on macroeconomic performance, as reflected in rates of economic growth and investment. Much of this analysis is empirical, using data on the performance of a broad group of countries. This paper contributes to this literature by using a framework for the determinants of economic growth that I have developed and used in previous studies. To motivate the extension of this...
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...JAGANNATH UNIVERSITY DEPARTMENT OF FINANCE JAGANNATH UNIVERSITY DEPARTMENT OF FINANCE COURSE TITLE Public finance COURSE CODE: 3105 COURSE TITLE Public finance COURSE CODE: 3105 AN ASSIGNMENT ON EFFECTS OF PUBLIC EXPENDITURES ON THE DISTRIBUTION OF INCOME AN ASSIGNMENT ON EFFECTS OF PUBLIC EXPENDITURES ON THE DISTRIBUTION OF INCOME SUBMITTED TO: Ayesha Akhter Lecturer DEPARTMENT OF FINANCE FACULTY OF BUSINESS STUDIES JAGANNATH UNIVERSITY Ayesha Akhter Lecturer DEPARTMENT OF FINANCE FACULTY OF BUSINESS STUDIES JAGANNATH UNIVERSITY SUBMITTED BY: Group-01 DEPARTMENT OF FINANCE JAGANNATH UNIVERSITY Group-01 DEPARTMENT OF FINANCE JAGANNATH UNIVERSITY Name of the group members: SL NO. | NAME | ID NO. | 01 | ROBIUL ISLAM RUBEL | B-120203019 | 02 | MD.ABUL KALAM AZAD | B-120203023 | 03 | LAMIA AKTER | B-120203036 | 04 | ASIF AL SAIF | B-120203139 | 05 | MAHMUDUL HASSAN | B-120203102 | 06 | MOHAMMAD MEHADI HASAN | B-120203097 | 07 | ROMANA AKTER PRIA | B-120203059 | 08 | MITHUN KUMER | B-120203041 | 09 | MD.ABU SAYED | B-120203026 | 10 | MOHAMMAD RUHUL AMIN | B-120203062 | TABLE OF CONTENTS SL. NO...
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...implications in the overall economic prosperity. Globally, it is reported that the top 1 percent of income recipients receive about 15 percent of worldwide income, and the top 5 percent receive 40 percent of all income. Meanwhile, the poorest 20 percent receive only 1 percent of the global income. This paper attempts to unlock the significant factors that affect income inequality. In 1963, Simon Kuznets derived the inverted U hypothesis from which he inferred that through the course of development, as per capita income increases, initially, income inequality will increase before it starts to improve. In this paper, I will be using data on 61 countries, an inverted u pattern is found. The labor surplus model supports that the share of labor in industry and high population growth rates explain the inverted U. Economic Disparity Economic growth refers to a rise in national per capita income and product. However, economic growth does not mean that there is improvement in mass living standards. It can be a result of increase of wealth for the rich while the poor have less or no improvement in their living standards (Gillis, 70). This uneven distribution of income is referred to as income inequality. There is much income inequality existing in individual countries as well as globally. Globally, it is reported that the top 1 percent of income recipients receive...
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...Education and Income Inequality: A Meta-Regression Analysis Abdul Jabbar Abdullah* Hristos Doucouliagos Elizabeth Manning - FIRST DRAFT - Please do not quote without permission from the authors September 2011 Abstract This paper revisits the literature that investigates the effects of education on inequality. Specifically, the paper provides a comprehensive quantitative review of the extant econometrics literature through a meta-regression analysis of 64 empirical studies that collectively report 868 estimates of the effects of education on inequality. We find that education affects the two tails of the distribution of incomes; it reduces the income share of top earners and increases the share of the bottom earners, but has no effect on the share of the middle class. Inequality in education widens income inequality. Education has a larger negative effect on inequality in Africa. The heterogeneity in reported estimates can be largely explained by differences in the specification of the econometric model. JEL Codes: I24, C01 Keywords: Education, inequality, meta-regression analysis Number of words: 12,683 * Corresponding author. Abdullah: Universiti Teknologi Mara Sarawak Campus, Malaysia and PhD Candidate Deakin University, ajabd@deakin.edu.au Doucouliagos: School of Accounting, Economic and Finance, Deakin University, douc@deakin.edu.au Manning: School of Accounting, Economic and Finance, Deakin University, elizabem@deakin.edu.au 1 Education and Income Inequality:...
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...SECTOR DEVELOPMENT INCREASE INCOME INEQUALITY? SOME ECONOMETRIC EVIDENCE FROM BANGLADESH Abu N.M. Wahid Tennessee State University Muhammad Shahbaz COMSATS Institute of Information Technology, Lahore, Pakistan Mehmood Shah University of Management and Technology, Lahore, Pakistan Mohammad Salahuddin Southeast University Banani, Dhaka, Bangladesh ABSTRACT This paper is an attempt to examine the relationship between financial development and income inequality. In doing so, we have used Bangladeshi data for the period 1985-2006. We have employed auto-regressive distributed lag (ARDL) methodology for cointegration. We have also carried out sensitivity analysis and stability tests. Our findings suggest that financial development increases income inequality. Economic growth seems to equalize income distribution. Inflation and trade openness also worsen income inequality. Finally, income inequality is being increased by social spending in the country over long run. This study provides new directions for policy makers to reduce income inequality to share the fruits of economic development among the wider spectrum of the society. Keywords: Financial sector, development, trade openness, income inequality, Bangladesh JEL Classifications: D14, D33, F1 INTRODUCTION Economic growth and its correlates have been the focus of a large number of studies over the recent past. These studies primarily put emphasis on various aspects or sources of growth. One of the important correlates...
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...Bhaduri Neeraj Jain Naveen A. Kumar Kirti Katiyar Harsh Agarwal Dipankar Duttagupta MIDDLE-INCOME TRAP IN INDIA MIDDLE-INCOME TRAP IN INDIA TABLE OF CONTENTS 1. Introduction……………………………………………………………………………………………… 2. The Middle Income Trap…………………………………………………………………………… 3. Reason why countries are struck in Middle-Income Trap…………………………. 4. India enters the Middle Income Group…………………………………………………….. 5. Factors causing Middle Income Trap and Economic Slowdown………………… 6. Income inequality and its relevance…………………………………………………………. 7. How to avoid India falling into Middle Income Trap…………………………………. 8. Conclusion………………………………………………………………………………………………… INTRODUCTION According to International Monetary Fund World Economic Outlook (April-2015), GDP (nominal) per capita of India in 2014 at current prices is $1,627. India is in the lower-middle income category. India’s entry to the middle income group has raised the question whether it will be able to avoid the ‘middle income trap’ which refers to prolonged stay in the middle income category and failure to move ahead to the high income category. India’s economy has developed quickly in the last decade, improving living standards and experiencing strong growth in such critical sectors as ICT (information, communication and technology). In recent years, however, circumstances have become less conducive to growth: macroeconomic conditions in the developed economies point to a prolonged external slowdown...
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...Economic Modelling 28 (2011) 1348–1353 Contents lists available at ScienceDirect Economic Modelling j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / e c m o d Foreign direct investment and China's regional income inequality☆ Kang Yu a, Xian Xin b,c, Ping Guo a, Xiaoyun Liu d,⁎ a School of Economics and Management, Zhejiang Forestry University, Zhejiang, 311300, PR China Center for Rural Development Policy, China Agricultural University, Beijing, 100083, PR China c College of Economics and Management, China Agricultural University, Beijing, 100083, PR China d College of Humanities and Development Studies, China Agricultural University, Beijing, 100083, PR China b a r t i c l e i n f o a b s t r a c t China's widening regional income inequality coupled with its pronounced regional disparity in foreign direct investment stock since 1990 has claimed the attention of many scholars. While some researchers confirm regional disparity in China's foreign direct investment, others attribute the widening regional income inequality to this regional disparity. This paper thus assesses the impacts of China's stock of foreign direct investment on its regional income inequality using simultaneous equation model and the Shapley value regression-based decomposition approach. Our results suggest that China's stock of foreign direct investment has accounted for merely 2% of its regional income inequality. Furthermore, the contribution ratio of per...
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...THE GLOBALIZATION RORSCHACH TEST: INTERNATIONAL ECONOMIC INTEGRATION, INEQUALITY AND THE ROLE OF GOVERNMENT NANCY BRUNE and GEOFFREY GARRETT* November 2004 Forthcoming in Annual Review of Political Science vol. 8, 2005 In this review essay, we address the three principal questions that have dominated the debate over the distributive effects of globalization. First, how has globalization affected inequality among countries? Second, how has globalization affected inequality within countries? Third, how has globalization affected the ability of national governments to redistribute wealth and risk within countries? We conclude that despite the proliferation of social science research on the consequences of globalization, there is no solid consensus in the relevant literatures on any of these questions. This is because scholars disagree about how to measure globalization and about how to draw causal inferences about its effects. Keywords: globalization, inequality, economic growth, government spending, privatization ___________________________________________________________ * Nancy Brune is a doctoral candidate at Yale University. She can be reached at nbrune@isop.ucla.edu. Geoffrey Garrett is Vice Provost and Dean of the International Institute, Director of the Ronald W. Burkle Center for International Relations, and Professor of Political Science at UCLA. He can be reached at ggarrett@international.ucla.edu. The authors Alexandra Guisinger, David Nickerson and Jason Sorens...
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...Theoretical development The theoretical view in economic inequality has a long history. The deliberation of fair distribution can be old-fashioned to classical economist David Recardio and leftist theoretical matters as Karl Marx. These theorists have already documented the magnitude of distribution in the society, and among different classes of the people. 3.2.1 Kuznets Hypothesis: A reasonably moderate theory which has prevailed in the mainstream academia for about half a century is attributed to Kuznets (1955), which argues that income inequality would change as economic growth changes or more precisely, income inequality would rise first and then decline with economic growth. This theory is related with factor movement between sectors where there is inequality, which permits income distribution does not need to be fully equalized. This theory implies that fairer distribution may lead to higher productivity.[1] Kuznets curve is the graphical representation of Simon Kuznets's theory ('Kuznets hypothesis') that economic inequality increases over time while a country is developing, then after a critical average income is attained, begins to decrease. Figure 3.1: Graphical representation of Kuznets curve One theory as to why this happens, in early stages of development, when investment in physical capital is the main mechanism of economic growth, inequality encourages growth by allocating resources towards those who save and...
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...Running head: INCOME DISTRIBUTION IN THE UNITED STATES Income Distribution in the United States and the Lorenz Curve 1 Market economies are favored and well-known for generating macroeconomic growth and progress in industrialized nations, such as the United States. Numerous academic studies and economic research have been done not only to measure economic growth, but also to analyze any disparities in income distributions among the general American population. This paper will examine trends and patterns of American wages since the 1970s, focusing on shifts in income distributions to see if these shifts can be interpreted as income inequality across different sectors of our society. Furthermore, this paper will study two important and interlinked methods of measuring income inequality, which are the Lorenz Curve and the Gini Coefficient Index. The Executive Branch of our federal government and the U.S. Congress keep a close eye on income distributions throughout the entire nation. These bodies rely heavily on data collected and analyzed by non-partisan agencies such as the U.S. Census Bureau, the Internal Revenue Service (IRS), the U.S. Bureau of Economic Analysis, the Congressional Budget Office (CBO), and academic institutitions that provide data and statistical analysis to assist in economic and budgetary decisions made by elected officials concerning a wide array of policy issues such as taxes, social insurance programs and other issues that impact the overall economy...
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...Income Inequality in America: An Analysis of Policies from Reagan to Obama and What Policies Can Help Close the Gap Income inequality in America has been of great importance in recent election cycles. Candidates from both sides of the political aisle have addressed the growing economic and social concern of increasing income and wealth inequality throughout the country. However, policies to address this growing concern are vastly different. This paper seeks to examine policies from Reagan to Obama that contributed to today’s massive income and wealth inequality. Was it tax reform throughout the 1980s and 1990s that contributed to inequality? Did the Federal Reserve perpetuate policies through massive quantitative easing that led to...
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