CONVERGENCE IN INCOME INEQUALITY ACROSS THE EU-15

Year 2022, Volume: 17 Issue: 58, 576 - 588, 26.07.2022

Ali Arı , Raif Cergibozan , Caner Demir , Hakan Yetkiner

https://doi.org/10.14783/maruoneri.1014672

Cited By: 2

Abstract

The purpose of this study is to examine whether there is convergence in income inequality across the European Union-15 (EU-15) member countries over the 1988-2017 period. The system-GMM estimations suggest a significant convergence process in income inequality between EU-15 countries, but at higher values of the Gini coefficient. This ‘unpleasant’ result may indicate the inefficiency of extensive EU social and developmental projects and programs aimed at reducing national and regional disparities. The estimates also show more rapid convergence between the EU-15 countries when the country-specific economic and political control variables are included. On the other hand, our results indicate that an increase in FDI inflows leads to higher income inequality within individual countries while in countries where political rights and civil liberties are well established, income inequality tends to be lower.

Keywords

Income inequality, Inequality convergence, EU-15, System GMM

AB-15 ÜLKELERİ ARASINDA GELİR EŞİTSİZLİĞİ YAKINSAMASI

Abstract

Bu çalışmanın amacı, 1988-2017 döneminde Avrupa Birliği-15 (AB-15) üyesi ülkeler genelinde gelir eşitsizliğinde yakınsama olup olmadığını incelemektir. Sistem-GMM tahminleri, AB-15 ülkeleri arasındaki gelir eşitsizliğinde, ancak Gini katsayısının daha yüksek değerlerinde önemli bir yakınsama sürecine işaret etmektedir. Bu 'hoş olmayan' sonuç, AB'nin ulusal ve bölgesel eşitsizlikleri azaltmaya yönelik kapsamlı sosyal ve kalkınma proje ve programlarının verimsizliğini gösterebilmektedir. Tahminler, ülkeye özgü ekonomik ve siyasi kontrol değişkenleri de dahil edildiğinde AB-15 ülkeleri arasında daha hızlı yakınsama olduğunu da göstermektedir. Öte yandan, sonuçlarımız doğrudan yabancı sermaye girişlerindeki artışın ülkelerde daha yüksek gelir eşitsizliğine yol açtığını, siyasi hakların ve sivil özgürlüklerin iyi olduğu ülkelerde ise gelir eşitsizliğinin daha düşük olma eğiliminde olduğunu göstermektedir.

Keywords

gelir eşitsizliği, gelir eşitsizliği yakınsamas, AB-15, System GMM

References

• Acemoglu, D., “Technical Change, Inequality, and the Labor Market,” Journal of Economic Literature, 40(1), 7—72, 2002.
• Aghion, P., E. Caroli and C. Garcia-Penalosa, “Inequality and Economic Growth: The Perspective of the New Growth Theories,” Journal of Economic Literature, 37(4), 1615—1660, 1999.
• Alvarez-Garcia, S., J. Prieto-Rodriguez and R. Salas, “The Evolution of Income Inequality in the European Union During the Period 1993–1996’” Applied Economics, 36, 1399—1408, 2004.
• Anderson, T.W. and C. Hsiao, “Estimation of Dynamic Models with Error Components,” Journal of the American Statistical Association, 76, 598—606, 1981.
• Anderson, T.W. and C. Hsiao, “Formulation and Estimation of Dynamic Models Using Panel Data, Journal of Econometrics, 18, 47—82, 1982.
• Arellano, M. and S. Bond, “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations’” Review of Economic Studies, 58(2), 277—297, 1991.
• Arellano, M. and O. Bover, “Another Look at the Instrumental Variable Estimation of Error-Components Models,” Journal of Econometrics, 68(1), 29—51, 1995.
• Asteriou, D., S. Dimelis and A. Moudatsou, “Globalization and Income Inequality: A Panel Data Econometric Approach for the EU27 Countries,” Economic Modelling, 35, 931—939, 2014.
• Baltagi, B., Econometric Analysis of Panel Data, 3rd Edition, John Wiley & Sons, West Sussex, 2005.
• Banerjee, A. V. and A. F. Newman, “Occupational Choice and the Process of Development,” Journal of Political Economy, 101(2), 274—298, 1993.
• Basu, P. and A. Guariglia, “Foreign Direct Investment, Inequality, and Growth’” Journal of Macroeconomics, 29(4), 824—839, 2007.
• Benabou, R., “Inequality and Growth,” in B. Bernanke and J. J. Rotemberg, eds., NBER Macroeconomics Annual 11, 11—73, MIT Press, Cambridge, 1996.
• Bergh, A. and T. Nilsson, “Do Liberalization and Globalization Increase Income Inequality?” European Journal of Political Economy, 26, 488—505, 2010.
• Bleaney, M. and A. Nishiyama, “Convergence in Income Inequality: Differences between Advanced and Developing Countries,” Economic Bulletin, 4(22), 1—10, 2003.
• Blundell, R. and S. Bond, “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,” Journal of Econometrics, 87(1), 115—143, 1998.
• Caselli, F., G. Esquivel and F. Lefort, “Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics,” Journal of Economic Growth, 1(3), 363—389, 1996.
• Chambers, D. and S. Dhongde, “Convergence in Income Distributions: Evidence from a Panel of Countries,” Economic Modelling, 59, 262—270, 2016.
• Chambers, D. and S. Dhongde, “Are Countries Becoming Equally Unequal?” Empirical Economics, 53, 1323—1348, 2017.
• Choi, C., “Does Foreign Direct Investment Affect Domestic Income Inequality?” Applied Economics Letters, 13(12), 811—814, 2006.
• Dabla-Norris, E., K. Kochhar, N. Suphaphiphat, F. Ricka and E. Tsounta, “Causes and Consequences of Income Inequality: A Global Perspective,” IMF Discussion Note, No: 15/13, 2015.
• Deininger, K. and L. Squire, “A New Data Set Measuring Income Inequality,” World Bank Economic Review, 10(3), 565—591, 1996.
• Demirguc-Kunt, A. and R. Levine, Finance and Inequality: Theory and Evidence,” Annual Review of Financial Economics, 1, 287—318, 2009.
• Dhongde, S. and X. Miao, “Cross-Country Convergence in Income Inequality,” ECINEQ Working Paper, No. 290, 2013.
• Dreher, A. and N. Gason, “Has Globalization Increased Inequality?” Review of International Economics, 16, 516—536, 2008.
• Edwards, S., “Trade Policy, Growth, and Income Distribution,” American Economic Review, 87(2), 205—210, 1997.
• Ezcurra, R. and P. Pascual, “Is There Convergence in Income Inequality Levels among the European Regions?” Applied Economic Letters, 12(12), 763—767, 2005.
• Feenstra, R. C. and G. H. Hanson, “Globalization, Outsourcing and Wage Inequality,” American Economic Review, 86, 240—245, 1996.
• Galor, O. and J. Zeira, “Income Distribution and Macroeconomics,” Review of Economic Studies, 60(1), 35—52, 1993.
• Gopinath, M. and W. Chen, Foreign Direct Investment and Wages: A Cross-Country Analysis,” Journal of International Trade & Economic Development, 12(3), 285—309, 2003.
• Hansen, L. P., “Large Sample Properties of Generalized Method of Moments Estimators,” Econometrica, 50(4), 1029—1054, 1982.
• Hoeffler, A. E., “The Augmented Solow Model and the African Growth Debate,” Oxford Bulletin of Economics and Statistics, 64(2), 135—158, 2002.
• Holtz-Eakin, D., W. Newey, and H. S. Rosen, “Estimating Vector Autoregressions with Panel Data, Econometrica, 56(6), 1371—1395, 1988.
• IMF, World Economic Outlook, Chapter 4: Globalization and Inequality, Washington, 31—65, 2007.
• Islam, N., “Growth Empirics: A Panel Data Approach,” Quarterly Journal of Economics, 110(4), 1127—1170, 1995.
• Jaumotte, F., S. Lall and C. Papageorgiou, “Rising Income Inequality: Technology, or Trade and Financial Globalization?” IMF Economic Review, 61(2), 271—309, 2013.
• Katz, L. F. and D. H. Autor, “Changes in the Wage Structure and Earnings Inequality,” in O. Ashenfeher and D. Card, eds., Handbook of Labor Economics, Vol. 3, Elsevier-North Holland, 1463—1555, 1999.
• Kuznets, S, “Economic Growth and Income Inequality,” American Economic Review, 45, 1—28, 1955.
• Morelli, S., T. Smeeding and J. Thompson, “Post-1970 Trends in Within-Country Inequality and Poverty: Rich and Middle-Income Countries, in A. Atkinson and F. Bourguignon, eds., Handbook of Income Distribution, Vol. 2. Elsevier-North Holland, 593—696, 2015.
• OECD, “Growth and Income Inequality: Trends and Policy Implications,” OECD Economics Department Policy Notes, No. 26, 2015.
• Piketty, T., Capital in the Twenty-First Century, The Belknap Press of Harvard University Press, Cambridge, 2014.
• Ravallion, M., “Inequality Convergence,” Economic Letters, 80, 351—356, 2003.
• Roodman, D., “How to Do xtabond2: An Introduction to Difference and System GMM in Stata,” The Stata Journal, 9(1), 86—136, 2009.
• Savoia, F., “Income Inequality Convergence across EU Regions,” LIS Working Paper Series, No. 760, 2019.
• Tselios, V., “Growth and Convergence in Income Per Capita and Income Inequality in the Regions of the EU,” Spatial Economic Analysis, 4, 343—370, 2009.
• Windmeijer, F., “A Finite Sample Correction for the Variance of Linear Efficient Two-Step GMM Estimators,” Journal of Econometrics, 126(1), 25—51, 2005.