The stabilizing effect of fiscal policies on the dynamics of effective demand and income distribution in Japan

In recent years a large number of cross-national studies have examined the causes and consequences of income inequality within nations. Unfortunately, few of these studies have attended very carefully to problems of measurement and definitional consistency that can seriously undermine the comparative use of currently available data on income shares. This article offers a discussion of the major theoretical and practical problems that can arise in measuring and comparing patterns of income distribution across nations, focusing on the completeness of income coverage, the unit of analysis, the time period over which income is measured, the scope of population coverage, the underreporting of income, and the effect of public sector fiscal policies. It then assesses major published sources of cross-national data on the size distribution of income in light of these problems. Finally, the article offers several suggestions for minimizing the negative consequences of measurement problems that remain in even the best available data on income shares.

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Income Concentration, Market Size and Informal Sector in Africa

International Journal of Innovation and Economic Development ◽

10.18775/ijied.1849-7551-7020.2015.51.2001 ◽

2019 ◽

Vol 5 (1) ◽

pp. 7-23

Author(s):

Tchakounté Njoda Mathurin ◽

Hamit Halou Chalout

Keyword(s):

Economic Policy ◽

Simple Model ◽

Income Distribution ◽

Informal Sector ◽

Informal Economy ◽

Market Size ◽

Fiscal Policies ◽

The Poor ◽

The Government ◽

Income Concentration

In this study, we analyze the link between income concentration and the size of the informal sector. We construct a simple model where income concentration determines demand and firms decide whether to operate in the formal or the informal economy is outlined. The government collects taxes and returns them to society either as a productive public good for its use by formal firms or as transfers to the poor. It is further postulated that income distribution affects the response of the informal sector to different fiscal policies, either demand or supply-orientated. In this case, redistribution towards the middle class decreases the size of the informal sector and increases the capacity of fiscal instruments to reduce informality. Data concerns 38 Africans’ countries in which the characteristic of income distribution is similar across countries. Using this comparable macro-level panel data between 1991 and 2013, we find strong evidence that high-income concentration leads to a large informal sector. Furthermore, an economic policy, including the effective application of the tax and regulatory procedures, should help to keep down the size of the informal economy.

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