Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society

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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society

New Evidence on Determinants of Income Inequality

Vol.24, No.2, June , 125–162

English Version |  Korean Version
  •   (Department of Economics, Korea University)

  •   (Department of Economics, Kyung Hee University)


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.

   income inequality, trade openness, financial openness, technological progress

JEL classification codes
   C10, D31, J31, F10

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