Income Inequality, Globalization, and Country Risk: A Cross-Country Analysis

Lee, Chi‐Chuan; Lien, Donald

doi:10.3846/tede.2019.11414

Cited by 49 publications

(25 citation statements)

References 55 publications

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“…In this paper, total government expenditure negatively affected income inequality in the lower regime but reduced income inequality in the higher regime, this being consistent with the inverted U-shaped Kuznet hypothesis. These results were consistent with Gregorio and Lee (2002); Abdullah et al (2015); Park (2017); and Lee et al (2020) although these studies used linear estimation. Health-care and military expenditures seemed to have no statistical impact on income inequality in developed countries.…”

Section: Resultssupporting

confidence: 86%

Do government expenditure reduce income inequality: evidence from developing and developed countries

Sidek

2021

SEF

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Purpose This paper aims to re-examine the impact of government expenditure on income inequality. Existing studies provide mixed results on whether government expenditure reduces or increases income inequality. In this paper, government expenditure is viewed as a tool for redistribution, hence, its impact on inequality is examined. Design/methodology/approach A sample of 122 countries with 91 and 31 countries categorized as developing and developed countries is used. The dynamic panel threshold regression is used to examine the impact of government expenditure on income inequality and to estimate the turning point of the negative or positive effects. Findings The major findings suggest that, in general, government expenditure does reduce income inequality. Results from developed countries support the inversed U-shaped Kuznet curve where higher government expenditure initially led to more inequality but would eventually bring about a positive effect after a certain threshold level. For developing countries, education and development expenditure were the driving forces towards lower income inequality. Practical implications Several policy implications can be derived from this paper. First, government expenditure is a useful tool to alleviate the problem of income inequality. More integration with the global economy via trading activities is also an important channel to help reduce income inequality. Finally, better institutional quality provides an effective ecosystem in promoting better redistribution of income via government expenditure. Originality/value This paper presents a maiden attempt to estimate a threshold value or when government expenditure starts to reduce or increase income inequality. The sample is segregated into developed and developing countries to further control the effect of government size and the level of development of a country.

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Section: Resultssupporting

confidence: 86%

Do government expenditure reduce income inequality: evidence from developing and developed countries

Sidek

2021

SEF

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“…It is not only considered as an essential measure of economic injustice or unequal opportunity but also a significant indicator of the overall prosperity and well-being of society (Lee & Lee, 2018;Lee, Lee, & Chang, 2015). Over the past few decades, the deterioration of income distribution has already devastated the global economy becomes the most critical challenge for any country around the world (Antràs, de Gortari, & Itskhoki, 2017;Chiu & Lee, 2019;Lee, Lee, & Lien, 2020). Studies concerning income inequality mainly focus on what causes income disparities from the perspectives of economic, social and political environments.…”

Section: Introductionmentioning

confidence: 99%

The impact of FDI on income inequality: Evidence from the perspective of financial development

Lee

Cheng

2020

Int. J Fin Econ

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By considering the threshold effects of different financial indicators, the current study investigates the relationship among income inequality, foreign direct investment (FDI), and financial development (FV) for a sample of 37 countries over the period 2001-2015. Using the panel smooth transition regression (PSTR) model, the empirical results indicate that FDI helps to reduce income inequality, but this beneficial effect becomes weak when the country has reached a threshold level of financial development. We also find that the effect of FV on income inequality is significantly positive, but this harmful effect decreases when the development of the financial system increases further. When the cross-country heterogeneity is considered, the results indicate that it is possible to improve income distribution through a combination of foreign and domestic funds for non-high income and nonlending countries. For those of non-income and counties with low FDI levels, they should focus more on strengthening financial development.

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“…An increase in KOFPoF index by 1% increases inequality by 0.11%. As regards the impact of political globalisation on income inequality, the research results are in line with Lee et al (2020), but they do not distinguish between the impact of different measures of political globalisation. Controversial results have also been found in the literature.…”

Section: Resultsmentioning

confidence: 67%

An investigation of the nexus between globalisation dimensions and income inequality

Tamašauskienė¹,

Žičkienė²

2021

EBER

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The objective of the article is to explore the nexus between changes of various globalisation dimensions, defined by either policy (de jure) or outcomes (de facto), and the rise in income inequality in a panel of 27 EU countries during the period 1998-2017. Research Design & Methods: In order to tackle endogeneity issues, the effect is empirically tested applying the appropriate one-step system generalised method of moments (GMM) technique. Globalisation is measured by the de jure and de facto trade, financial, social, and political KOF globalisation indexes. Income inequality is measured by net Gini. To examine the sensitivity of our findings, we apply the decile ratio and quintile ratio as dependent variables. Findings: We have found several significant results. First, de jure trade and de jure financial globalisation exert a big affirmative influence on income inequality and suggest that changes in trade and financial policy have increased inequality in the EU countries. Second, the results testify that de jure and de facto political globalisation influence income inequality in various ways and opposing directions. Finally, the effect of social globalisation on income inequality lacks statistical significance. Implications & Recommendations: De jure trade and financial globalisation measures which are based on tariffs, trade taxes, trade and investment regulations, etc. increase income inequality. Therefore, policymakers need to rethink their approach to trade and financial globalisation policy and ensure that the increasing benefits of globalisation and rising income would be distributed more equally between different groups of the population. Contribution & Value Added: Economic literature has focused on the effect of different single indicators of economic globalisation on income distribution and inequality, while the effect of various globalisation dimensions is almost nonexistent. Contrary to previous studies, we also distinguish between de jure and de facto indicators of various dimensions of globalisation and reveal that they have diverse impacts on income inequality. Article type:research article

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Income Inequality, Globalization, and Country Risk: A Cross-Country Analysis

Cited by 49 publications

References 55 publications

Do government expenditure reduce income inequality: evidence from developing and developed countries

Do government expenditure reduce income inequality: evidence from developing and developed countries

The impact of FDI on income inequality: Evidence from the perspective of financial development

An investigation of the nexus between globalisation dimensions and income inequality

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