scholarly journals Robust determinants of income distribution across and within countries

PLoS ONE ◽  
2021 ◽  
Vol 16 (7) ◽  
pp. e0253291
Author(s):  
Liang Frank Shao
Keyword(s):  
Panel Data ◽  
Income Inequality ◽  
Income Distribution ◽  
Empirical Studies ◽  
Time Variable ◽  
Omitted Variables ◽  
Cross Sectional ◽  
Innovative Strategy ◽  
Positive Effects ◽  
Selection Operator

Multicollinearity widely exists in empirical studies, which leads to imprecise estimation and even endogeneity when omitted variables are correlated with any regressors. We apply an innovative strategy, different from the usual tools (instrumental variable, ridge regression, and least absolute shrinkage and selection operator), to estimate the robust determinants of income distribution. We transform panel data into (quasi-) cross-sectional data by removing country and time effects from the data so that all variables become zero mean and orthogonal to the country dummies and time variable, and multicollinearity becomes very low or even disappears with the quasi-cross sectional data in any specifications regardless of country dummies and time variable being included or not. Our contribution is threefold. First, we build a general method to address the multicollinearity issue in panel data, which is to isolate the common contents of correlated variables and ensures robust estimates in different specifications (dynamic or static specifications) and estimators (within- or between-effects estimators). Second, we find no evidence for the Kuznets hypothesis within and across countries; investment is economically and statistically the most robust determinant of income inequality; meanwhile, labor income share shows robustly and consistently positive effects on income inequality, which challenges the related literature. Last, simulations with our estimates show that the total marginal effects of development (regarding GDP, capital stock and investment) on income inequality are very likely to be positive within and between countries except that the impacts on middle-60% and top-quintile income shares are not so likely to increase income inequality across countries.

An Examination of Audit Report Lag for Banks: A Panel Data Approach

2000 ◽  
Vol 19 (2) ◽  
pp. 159-174 ◽  
Author(s):  
B. Charlene Henderson ◽  
Steven E. Kaplan
Keyword(s):  
Data Analysis ◽  
Panel Data ◽  
Panel Data Analysis ◽  
Explanatory Power ◽  
Omitted Variables ◽  
Audit Report ◽  
Cross Sectional ◽  
Cross Sectional Analysis ◽  
The Cross ◽  
Sectional Analysis

This study investigates the determinants of audit report lag (ARL) for a sample of banks. Researchers have been interested in the determinants of ARL, in part, because it impacts the timeliness of public disclosures. However, prior ARL research has relied exclusively on regression analysis of cross-sectional samples of companies from many industries. In addition to focusing exclusively on banks, panel data analysis is introduced and compared with cross-sectional analysis to demonstrate its power in dynamic settings and its potential to improve estimation. Results reveal important differences between cross-sectional analysis and panel data analysis. First, bank size is negatively related to ARL in cross-section but positively related to ARL using panel data analysis. The cross-sectional size estimate is subject to omitted variables bias, and furthermore, cross-sectional analysis fails to capture variation in size over time in relation to ARL. Panel data analysis both accounts for omitted variables and captures the dynamics of the relationship between size and ARL. As well, the panel data model's explanatory power far exceeds that of the cross-sectional model. This is primarily due to the panel model's use of firm-specific intercepts that both capture the role of reporting tradition and eliminate heterogeneity bias. Thus, panel data analysis proves to be a powerful tool in the analysis of ARL.

The effects of debt restructurings on income inequality in the developing world

2021 ◽  
pp. 135406612110014
Author(s):  
Glen Biglaiser ◽  
Ronald J. McGauvran
Keyword(s):  
Developing Countries ◽  
Panel Data ◽  
Income Inequality ◽  
Income Distribution ◽  
Government Spending ◽  
Tax Reform ◽  
Social Spending ◽  
The Poor ◽  
The Rich ◽  
The Impact

Developing countries, saddled with debts, often prefer investors absorb losses through debt restructurings. By not making full repayments, debtor governments could increase social spending, serving poorer constituents, and, in turn, lowering income inequality. Alternatively, debtor governments could reduce taxes and cut government spending, bolstering the assets of the rich at the expense of the poor. Using panel data for 71 developing countries from 1986 to 2016, we assess the effects of debt restructurings on societal income distribution. Specifically, we study the impact of debt restructurings on social spending, tax reform, and income inequality. We find that countries receiving debt restructurings tend to use their newly acquired economic flexibility to reduce taxes and lower social spending, worsening income inequality. The results are also robust to different model specifications. Our study contributes to the globalization and the poor debate, suggesting the economic harm caused to the less well-off following debt restructurings.

scholarly journals Educational Homogamy and Inter-Couple Income Inequality: Linking Demographic and Socio-Economic Consequences of Educational Expansion in Germany and Switzerland

2017 ◽  
Vol 43 (3) ◽  
pp. 587-610 ◽  
Author(s):  
Ramsey Wise ◽  
Christoph Zangger
Keyword(s):  
Decision Making ◽  
Panel Data ◽  
Income Inequality ◽  
Income Distribution ◽  
Working Time ◽  
Economic Consequences ◽  
Educational Expansion ◽  
Educational Homogamy ◽  
Marginal Impact

AbstractHow is educational expansion associated with increased educational homogamy and income inequality? Using SOEP and SHP panel data, we randomly match couples and compare the resulting income distribution to the observed one. Educational homogamy thereby has had only a marginal impact on earnings-based income inequality between couples, which is largely due to the endogenous decision-making of couples concerning working time.

Impact of the Presence of Embassies on Trade: Evidence from Turkey

2019 ◽  
Vol 19 (1) ◽  
pp. 51-60
Author(s):  
Yusuf Kenan Bagir
Keyword(s):  
Panel Data ◽  
Bilateral Trade ◽  
Panel Data Analysis ◽  
Empirical Studies ◽  
Volume Effect ◽  
Foreign Missions ◽  
Cross Sectional ◽  
Exporting Firms ◽  
Main Driver ◽  
The Impact

AbstractThis paper analyzes the impact of the presence of foreign missions on trade using Turkey's unique expansion in its foreign embassy network (39 new embassies in 8 years) as the source of variation in a panel data setting. A majority of the existing empirical studies use cross-sectional bilateral trade data due to lack of variation over time (Rose, 2007; Moons and Bergeijk, 2013). Employing a panel data analysis, this paper is able to address the endogeneity issues that are associated with a standard cross-sectional analysis. The dependent variable in the paper is the trade between Turkey and 190 countries for 2006 to 2016. The results indicate that presence of an embassy increases export value by 30% and this increase comes mainly from the volume effect. Categorizing goods by the Rauch (1999) classification shows that the increase in differentiated goods exports is the main driver of the export surge. The number of exporting firms increases by about 8%. There is no statistically significant impact on the exports of homogeneous goods. Replication of the analysis for imports suggests no impact on imports.

scholarly journals Income Inequality and Advanced Democracies

2014 ◽  
Author(s):  
Vicki L. Birchfield ◽  
Raisa Mulatinho Simões
Keyword(s):  
United States ◽  
Income Inequality ◽  
Income Distribution ◽  
The United States ◽  
Cross Sectional ◽  
Macroeconomic Conditions ◽  
Classical Economics ◽  
The Past ◽  
Wide Range ◽  
Cross National

Over the past several decades, social scientists from a wide range of disciplines have produced a rich body of scholarship addressing the growing phenomenon of income inequality across and within advanced capitalist democracies. As globalization intensifies some scholars are beginning to put income disparities in developed democracies into wider perspective, examining inequality in advanced economies within the framework of global income distribution. As an object of inquiry, income inequality must be distinguished from the presumably more value-neutral term, income distribution, which has been studied since the origins of classical economics. How one derives a judgment about whether or not a given society’s income distribution is characterized by inequality requires an evaluative metric of either a longitudinal or a cross-sectional nature. Generally speaking and to side-step explicitly normative questions—the relative degree of inequality may be empirically assessed by temporal or longitudinal comparisons for single country studies (e.g., income distribution in the United States is more unequal now than in the 1950s and 1960s) or, alternatively, through cross-national comparisons (e.g., income inequality is higher in Great Britain than in Sweden). It is important to note that the lack of authoritative, comparable cross-national data until relatively recently impeded progress of this latter category of research. As a result, systematic investigations of income inequality or patterns of income distribution tended to be the exclusive domain of economists or sociologists and mostly focused on the United States. Within the past decade, however, political scientists—especially comparative political economists—have mined new databases and generated an impressive body of literature that moves research beyond a narrow focus on single-country studies to rigorous cross-national and time-series analyses and into new theoretical directions engaging the classic, paradigmatic questions of “who gets what, when, and how” that have long exercised the minds of students of politics and political economists. Given the intrinsic multidisciplinarity of the subject of income inequality, this article includes research by economists and sociologists as well as political scientists. Most research on income inequality addresses one of the following areas of inquiry: (1) the causal forces driving increasing inequality in developed economies; (2) the socioeconomic effects and political consequences of income inequality; (3) the relationships between income inequality and macroeconomic conditions, such as economic growth, unemployment, and the degree of trade and internationalization of the domestic economy. The recent work by French economist Thomas Piketty, whose 2013 book (2014, English translation) sold 2. 5 million copies, warrants special comment given its comprehensive scope and influence in putting income inequality at the forefront of global debates. Lastly, a new and growing body of scholarship explores the relationship among the environment, climate change, and income inequality.

scholarly journals The role of perceptions about trade and inequality in the backlash against globalization

2021 ◽  
Vol 1 (12) ◽  
Author(s):  
Barbara Dluhosch
Keyword(s):  
Income Inequality ◽  
Income Distribution ◽  
Well Being ◽  
Western Hemisphere ◽  
Subjective Well Being ◽  
Cross Sectional ◽  
Economic Implications ◽  
Individual Level ◽  
Subjective Element

AbstractMany countries in the Western hemisphere are experiencing a political backlash against globalization. When explaining this phenomenon, much of the extant research draws on the distributional effects of international competition, in particular the opposition to trade by those who are adversely affected. Using cross-sectional data on subjective well-being from the World Values Survey and the European Values Study and combing these self-reports with trade and incomes data, this paper contributes to this strand of research by focusing on the subjective element in the formation of anti-trade sentiments. It thus explores how the role of international trade in the income distribution is being perceived at the individual level. Simulations based on the data reveal that matters of income inequality are evaluated differently, depending on how deeply the respective economy is integrated into world markets: results suggest that the extent of trade globalization amplifies any negative effect of income inequality on subjective well-being. If the role of international openness in the income distribution is perceived to be more pronounced than it actually is, the subjective element has wider politico-economic implications; it carries the risk of costly anti-trade policies without necessarily narrowing the income distribution.

scholarly journals Explaining Fixed Effects: Random Effects Modeling of Time-Series Cross-Sectional and Panel Data

2014 ◽  
Vol 3 (1) ◽  
pp. 133-153 ◽  
Author(s):  
Andrew Bell ◽  
Kelvyn Jones
Keyword(s):  
Time Series ◽  
Panel Data ◽  
Random Effects ◽  
Fixed Effects ◽  
Random Coefficients ◽  
Omitted Variables ◽  
Cross Sectional ◽  
Variance Functions ◽  
Variable Bias ◽  
Random Effects Modeling

This article challenges Fixed Effects (FE) modeling as the ‘default’ for time-series-cross-sectional and panel data. Understanding different within and between effects is crucial when choosing modeling strategies. The downside of Random Effects (RE) modeling—correlated lower-level covariates and higher-level residuals—is omitted-variable bias, solvable with Mundlak's (1978a) formulation. Consequently, RE can provide everything that FE promises and more, as confirmed by Monte-Carlo simulations, which additionally show problems with Plümper and Troeger's FE Vector Decomposition method when data are unbalanced. As well as incorporating time-invariant variables, RE models are readily extendable, with random coefficients, cross-level interactions and complex variance functions. We argue not simply for technical solutions to endogeneity, but for the substantive importance of context/heterogeneity, modeled using RE. The implications extend beyond political science to all multilevel datasets. However, omitted variables could still bias estimated higher-level variable effects; as with any model, care is required in interpretation.

scholarly journals Trend of income inequality in Asia and effects of education

2020 ◽  
Vol 10 (2) ◽  
pp. 42-59
Author(s):  
Kang Park
Keyword(s):  
Panel Data ◽  
Income Inequality ◽  
Income Distribution ◽  
Educational Inequality ◽  
Level Of Education ◽  
Education Inequality ◽  
Marginal Effects ◽  
Negative Effect ◽  
Educational Variables ◽  
Unbalanced Panel Data

This study considers how education and globalization affect income inequality in Asia, with the unbalanced panel data. The evidence supports the validity of Kuznets inverted-U hypothesis for the connection between the income level and income inequality. However, when more variables are integrated into the model, the consistency of inverse U-shaped curve becomes weaker. The empirical results suggest that educational variables are highly influential in affecting income distribution. Our analysis indicates that a higher level of education achieved by the population aged 15 and over has improved income distribution in Asia, while educational inequality, measured by the educational Gini, has a negative effect on income distribution. Higher levels of globalization are correlated with higher levels of income inequality, while freedom, either political or economic, has marginal effects on the level of inequity in income distribution. Key words: Education inequality, globalisation, income inequality

Does Clientelism Affect Income Inequality? Evidence from Panel Data

2018 ◽  
pp. 1-24
Author(s):  
Ebney Ayaj Rana ◽  
Mustafa Kamal
Keyword(s):  
Panel Data ◽  
Income Inequality ◽  
Management Strategies ◽  
Political Regime ◽  
Cross Sectional ◽  
Fiscal Management ◽  
Long Run ◽  
Negative Effect ◽  
Cross Sectional Dependence ◽  
The Relationship

This paper studies the determinants of income inequality in a panel of countries to provide empirical evidence to the relationship between income inequality and clientelism. Using different panel data techniques, especially group mean fully modified OLS estimator, and also allowing for control variables, cross-sectional heterogeneity and cross-sectional dependence, we find that in the long run, clientelism exerts a significant negative effect on income equality. The overall results of the study have implications for fiscal management strategies and political regime choice.

scholarly journals Democratization and the Conditional Dynamics of Income Distribution

2019 ◽  
Vol 113 (2) ◽  
pp. 385-404 ◽  
Author(s):  
MICHAEL T. DORSCH ◽  
PAUL MAAREK
Keyword(s):  
Income Inequality ◽  
Income Distribution ◽  
Instrumental Variable ◽  
Fixed Effects ◽  
Empirical Studies ◽  
Middle Ground ◽  
Income Distributions ◽  
Simple Observation ◽  
Market Opportunities ◽  
Distributional Dynamics

Despite strong theoretical reasons to expect that democratization equalizes income distributions, existing empirical studies do not find a statistically significant effect of democratization on measures of income inequality. This paper starts from the simple observation that autocracies are heterogeneous and govern quite extreme distributional outcomes (also egalitarian). Democratization may drive extreme income distributions to a “middle ground.” We thus examine the extent to which initial inequality levels determine the path of distributional dynamics following democratization. Using fixed-effects and instrumental variable regressions, we demonstrate that egalitarian autocracies become more unequal following democratization, whereas democratization has an equalizing effect in highly unequal autocracies. The effect appears to be driven by changes in gross (market) inequality, suggesting that democratization has led, on average, to redistribution of market opportunities, rather than to direct fiscal redistribution. We then investigate which kinds of (heterogeneous) reforms are at work following democratizations that may rationalize our findings.

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