Eradicating Income Inequality in Lower Middle-Income Countries

Tangguh Pratysto(1*), Ingrid Panjaitan(2)

(1) STIE IGI Jakarta
(2) Universitas 17 Agustus 1945 Jakarta
(*) Corresponding Author

Abstract

Studying the distribution of income is an important issue to know what factors which affect to make income distribution more equitable, what factors can be the key to resolving the problem of income inequality, and shortening the distance between the poor and the rich. This paper studies the relationship between human capital, inflation rate, unemployment rate, physical capital, fiscal expenditure, gross domestic product growth, and urbanization on income inequality in 52 Lower Middle-Income Countries throughout 1990-2014. The authors estimate the impact of seven independent variables on income inequality as a dependent using Prais-Winsten with the robust model over period 1990-2014 at 52 Lower Middle-Income Countries. The results indicate an increase in human capital (gross school enrollment tertiary) can make the income distribution more even in the long run. The writers conclude that increases in human capital can reduce Gini coefficient and hence make income distribution fairer.

Keywords

School Enrollment Tertiary; Income Inequality; Gini coefficient; Human Capital; Income Distribution

Full Text:

PDF

References

Atkinson, A. (1975). The Economics of Inequality. Oxford: Clarendon Press.

Bagliano, F. C., & Bertola, G. (2004). Models for Dynamic Macroeconomics. Oxford: Oxford University Press.

Berg, A., & Ostry, J. (2011). Inequality and Unsustainable Growth: Two Sides of the Same Coin? International Monetary Fund Staff Discussion Note, 1–21. https://doi.org/10.1017/CBO9781107415324.004

Blinder, A., & Esaki. (1978). Microeconomic Activity and Income Distribution in the Postwar United States. The Review of Economics and Statistics, 160, 604-609.

Bobkov, V. (2013). let kommunistischeskoy transformacii vs Rossii: vliyanie na uroven I katchestvo zhizni. Kazakh economic review, 1-2, 22-43.

Bourguignon, F., & Morrisson, C. (1998). Inequality and development: The role of dualism. Journal of Development Economics, 57(2), 233–257. https://doi.org/10.1016/S0304-3878(98)00089-3

Buse, A. (1982). The Cyclical Behavior of the Size Distribution of Income in Canada. Canadian Journal of Economics, 15, 189-204.

Bussolo, M., De Hoyos, R. E., Medvedev, D., & van der Mensbrugghe, D. (2010). Global Growth and Distribution: Are China and India Reshaping the World? In Southern Engines of Global Growth. https://doi.org/10.1093/acprof:oso/9780199580606.003.0005

Castello, A., & Domenech, R. (2002). Human Capital Inequality and Economic Growth: Some New Evidence. The Economic Journal, 112(478), C187–C200. https://doi.org/10.1111/1468-0297.00024

Chaudhuri, S., & Ravallion, M. (2007). Partially Awakened Giants Uneven Growth in China and India. Dancing with Giants: China, India, and the Global Economy, 175–210. https://doi.org/10.1017/S147474560800387X

Checchi, D. (2004). Does Educational Achievement Help Explain Income Inequality? In Inequality, Growth, and Poverty in an Era of Liberalization and Globalization. https://doi.org/10.1093/0199271410.003.0004

Chen, A. (2010). Reducing China’s regional disparities: Is there a growth cost? China Economic Review, 21(1), 2–13. https://doi.org/10.1016/j.chieco.2009.11.005

Coleman, J. S. (1968). Equality of Educational Opportunity (COLEMAN) Study (EEOS). Equity & Excellence in Education, 6(5), 19–28. https://doi.org/10.3886/ICPSR06389

De Gregorio, J., & Lee, J.-W. (2002). Education and income inequality: new evidence from cross-country data. Review of Income and Wealth, 48(3), 395–416. https://doi.org/10.1111/1475-4991.00060

Fakthong, T. (2012). Convergence in Income Inequality and Growth under Public Investment in Human Capital: The Case of Thailand. Procedia Economics and Finance, 2(Que), 315–324. https://doi.org/10.1016/S2212-5671(12)00093-7

Han, J., Zhao, Q., & Zhang, M. (2016). China’s income inequality in the global context. Perspectives in Science, 7, 24–29. https://doi.org/10.1016/j.pisc.2015.11.006

Heckman, J. (2005). Inequality in America: What role for human capital policies? Focus, 23(November 2004), 10. https://doi.org/10.1007/s10888-006-9028-6

Kudasheva, T., Kunitsa, S., & Mukhamediyev, B. (2015). Effects of Access to Education and Information-communication Technology on Income Inequality In Kazakhstan. Procedia - Social and Behavioral Sciences, 191, 940–947. https://doi.org/10.1016/j.sbspro.2015.04.459

Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45(1), 1–28. https://doi.org/10.2307/2118443

Ling, S. C., Osman, A., Muhammad, S., Yeng, S. K., & Jin, L. Y. (2015). Goods and Service Tax (GST) Compliance among Malaysian Consumers: The Influences of Price, Government Subsidies, and Income Inequality. Procedia Economics and Finance, 35, 198-205.

Lundberg, M., & Squire, L. (2003). The simultaneous evolution of growth and inequality. Economic Journal, 113(487), 326–344. https://doi.org/10.1111/1468-0297.00127

Lyubimov, I. (2017). Income inequality revisited 60 years later: Piketty vs. Kuznets. Russian Journal of Economics, 3(1), 42–53. https://doi.org/https://doi.org/10.1016/j.ruje.2017.02.003

Mihnenoka, A., & Senfelde, M. (2015). Wage Share as a Factor of Income Inequality in the Context of the Structure of National Economy. Procedia Economics and Finance, 26(15), 1035–1043. https://doi.org/10.1016/S2212-5671(15)00927-2

Militaru, E., & Stanila, L. (2015). Income Variability in Romania: Decomposing Income Inequality by Household Characteristics. Procedia Economics and Finance, 26(15), 227–233. https://doi.org/10.1016/S2212-5671(15)00823-0

Mincer, J. (1958). Investment in Human Capital and Personal Income Distribution. The Journal of Political Economy, 66(4), 281–302. https://doi.org/10.1086/521238

Nolan, B. (1986). Unemployment and the Size Distribution of Income. Economical, 53,421-45.

OECD. (2013). Divided, we stand. Why inequality keeps rising. Journal of Chemical Information and Modeling, 53, 1689–1699. https://doi.org/10.1017/CBO9781107415324.004

Qin, D., Cagas, M. A., Ducanes, G., He, X., Liu, R., & Liu, S. (2009). Effects of income inequality on China’s economic growth. Journal of Policy Modeling, 31(1), 69–86. https://doi.org/10.1016/j.jpolmod.2008.08.003

Rajan, R. G., & Zingales, L. G. (2003). Saving Capitalism from the Capitalists: Unleashing the power of financial markets to create wealth and spread opportunity. Retrieved from http://faculty.chicagobooth.edu/luigi.zingales/papers/research/cappres.pdf

Ravallion, M. (2004a). Competing concepts of inequality in the globalization debate. World Bank Policy Research Working Paper No. 3038. Washington, DC: World Bank.

Ravallion, M. (2004b). Pro-Poor Growth: A Primer. World. https://doi.org/doi:10.1596/1813-9450-3242

Salverda, W., Nolan, B., & Smeeding, T. M. (2009). The Oxford Handbook of Economic Inequality. Oxford Handbooks in Economics.

Shahpari, G., & Davoudi, P. (2014). Studying Effects of Human Capital on Income Inequality in Iran. Procedia - Social and Behavioral Sciences, 109, 1386–1389. https://doi.org/10.1016/j.sbspro.2013.12.641

Smeeding, T. M., & Weinberg, D. H. (2001). Toward a uniform definition of household income. Review of Income and Wealth, 47(1), 1–24. https://doi.org/10.1111/1475-4991.00001

The World Bank. (2017). Data: The World Bank Group. Retrieved January 19, 2017, from The World Bank Group Website: http://data.worldbank.org/

Welch, F. (1999). In defense of inequality. American Economic Review, 89(2), 1–17. https://doi.org/10.1257/aer.89.2.1

Wroblowsky, T., & Yin, H. (2015). Income inequalities in China: Stylized facts vs. reality. Proceedings of the 1st Czech-China Scientific Conference 2015. Science Direct.

Zhang, Q., & Chen, R. (2015). Financial development and income inequality in China: An application of the SVAR approach. In Procedia Computer Science (Vol. 55, pp. 774–781). https://doi.org/10.1016/j.procs.2015.07.159

Article Metrics

Abstract view(s): 979 time(s)
PDF: 711 time(s)

Refbacks

  • There are currently no refbacks.