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National income and its distribution
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National income and its distribution

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  • Markus Brueckner
  • Era Dabla Norris
  • Mark Gradstein

Abstract

This paper revisits the effect of national income on distributional equality. Although the link between the two has featured prominently in the literature, a causal effect has been difficult to pin down due to the endogeneity of these variables. We use plausibly exogenous variations in the incomes of countries’ trading partners weighted by the level of trade flows, and international oil price shocks, as instruments for within-country variations in countries’ real GDP per capita. Controlling for country and time fixed effects, our instrumental variables regressions show that increases in national income have a significant moderating effect on income inequality: a 1 % increase in real GDP per capita reduces the Gini coefficient by around 0.08 percentage points on average. We document that education is one possible channel that mediates this relationship, and explore the implications of our findings for the welfare effect of national income growth. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Markus Brueckner & Era Dabla Norris & Mark Gradstein, 2015. "National income and its distribution," Journal of Economic Growth, Springer, vol. 20(2), pages 149-175, June.
    • Handle: RePEc:kap:jecgro:v:20:y:2015:i:2:p:149-175
    DOI: 10.1007/s10887-015-9113-4
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    4. Gustavo A. Marrero & Luis Servén, 2022. "Growth, inequality and poverty: a robust relationship?," Empirical Economics, Springer, vol. 63(2), pages 725-791, August.
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    6. Brueckner, Markus & Dabla-Norris, Era & Gradstein, Mark & Lederman, Daniel, 2018. "The rise of the middle class and economic growth in ASEAN," Journal of Asian Economics, Elsevier, vol. 56(C), pages 48-58.
    7. Duong, Khanh & Nguyen Phuc Van, 2023. "Innovation and Globalization: Benefactors or Barriers to Inclusive Growth?," GLO Discussion Paper Series 1357, Global Labor Organization (GLO).
    8. Majumder, Monoj Kumar & Raghavan, Mala & Vespignani, Joaquin, 2020. "Oil curse, economic growth and trade openness," Energy Economics, Elsevier, vol. 91(C).
    9. Liang Frank Shao & Melanie Krause, 2020. "Rising mean incomes for whom?," PLOS ONE, Public Library of Science, vol. 15(12), pages 1-20, December.
    10. Kammas, Pantelis & Sarantides, Vassilis, 2019. "Do dictatorships redistribute more?," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 176-195.
    11. Aiyar, Shekhar & Ebeke, Christian, 2020. "Inequality of opportunity, inequality of income and economic growth," World Development, Elsevier, vol. 136(C).
    12. Song, Yuegang & Paramati, Sudharshan Reddy & Ummalla, Mallesh & Zakari, Abdulrasheed & Kummitha, Harshavardhan Reddy, 2021. "The effect of remittances and FDI inflows on income distribution in developing economies," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 255-267.
    13. Jesús Crespo Cuaresma & Stephan Klasen & Konstantin M. Wacker, 2022. "When Do We See Poverty Convergence?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(6), pages 1283-1301, December.
    14. Cobbe, Jim, 2014. "Managing Development and Public Policy: A Personal View," MPRA Paper 60427, University Library of Munich, Germany.
    15. Majumderad, Monoj Kumar & Raghavan, Mala & Vespignani, Joaquin, 2020. "Oil Curse," MPRA Paper 101138, University Library of Munich, Germany, revised 2020.
    16. Banna, Hasanul & Alam, Ashraful & Chen, Xihui Haviour & Alam, Ahmed W., 2023. "Energy security and economic stability: The role of inflation and war," Energy Economics, Elsevier, vol. 126(C).
    17. Guilherme Amorim & Marcelo E. A. Silva, 2023. "Governance and growth: A panel VAR approach," Economics Bulletin, AccessEcon, vol. 43(4), pages 1896-1907.
    18. Ronald Fischer & Diego Huerta, 2016. "Economic Performance, Wealth Distribution and Credit Restrictions with Continuous Investment," Documentos de Trabajo 326, Centro de Economía Aplicada, Universidad de Chile.
    19. Ọláyínká Oyèkọ́lá, 2021. "Finance and inequality in a panel of US States," Empirical Economics, Springer, vol. 61(5), pages 2739-2795, November.
    20. Eric A. Hanushek, 2017. "Education and the Growth-Equity Trade-Off," NBER Chapters, in: Education, Skills, and Technical Change: Implications for Future US GDP Growth, pages 293-312, National Bureau of Economic Research, Inc.
    21. Zeira, Joseph & Battisti, Michele, 2018. "Inequality and Public Policy," CEPR Discussion Papers 13134, C.E.P.R. Discussion Papers.
    22. Brueckner,Markus & Lederman,Daniel, 2015. "Effects of income inequality on aggregate output," Policy Research Working Paper Series 7317, The World Bank.
    23. Gustavo A. Marrero & Juan Gabriel Rodríguez, 2019. "Inequality and growth: The cholesterol hypothesis," Working Papers 501, ECINEQ, Society for the Study of Economic Inequality.

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    More about this item

    Keywords

    National income; Inequality; Economic growth; Income distribution; O4; Oll;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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