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Article
Publication date: 15 January 2024

Edmond Berisha, Rangan Gupta and Orkideh Gharehgozli

The primary focus of this study is to examine the distributional consequences of the widespread increase in prices. The fundamental question the study aims to address is whether…

Abstract

Purpose

The primary focus of this study is to examine the distributional consequences of the widespread increase in prices. The fundamental question the study aims to address is whether the dynamics of income distribution due to higher inflation differ in the short term compared to the long run.

Design/methodology/approach

The authors estimated a panel-data model (fixed effects) using inequality and inflation data available at a high frequency, i.e. on a quarterly basis for over 30 years, and found evidence that inflation causes rapid swings in income distribution.

Findings

The authors’ contribution to the literature lies in providing evidence that inflation rapidly causes swings in income distribution, even after controlling for the state of the economy. The authors also demonstrate that the magnitude and direction of the effect of inflation on income inequality depend on whether the initial inflation rate is below or above the Federal Reserve’s target of 2%.

Originality/value

To the best of the authors’ knowledge, the authors are the first to emphasize that the targets set by central banks can drive the strength and direction of the relationship between inflation and income inequality.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 2 August 2019

Sima Siami-Namini and Darren Hudson

The purpose of this paper is to explore the effect of growth in different sectors of the economy of developing countries on income inequality and analyze how inflation, as a proxy…

Abstract

Purpose

The purpose of this paper is to explore the effect of growth in different sectors of the economy of developing countries on income inequality and analyze how inflation, as a proxy for monetary policy, makes a proportionate contribution for setting a binding national target for reducing income inequality. The paper examines the existence of a linear or nonlinear effect of inflation and sectoral economic growth on income inequality using a balanced panel data of 92 developing countries for the period of 1990–2014.

Design/methodology/approach

Methods section includes several steps as below: first, the functional form of the model using panel data for investigating the contribution of economic sectors in income inequality; second, to estimate the relationship between income inequality and sector growth: testing the Kuznets hypothesis; third, to estimate the relationship between inflation and income inequality base on general functional form of the model proposed by Amornthum (2004); fourth, a panel Granger causality analysis based on a VECM approach.

Findings

The statistically significant finding shows that first agricultural growth and then industrial growth have a dominate impact in reducing income inequality in our sample. But, the service sector growth has positive effects. The results confirm the existence of Kuznets inverted “U” hypothesis for industry growth and Kuznets “U” hypothesis for service sector growth. The findings show that sector growth and inflation affect income inequality in the long-run.

Originality/value

This research is an original paper which analyzes the effect of growth in different sectors of the economy of developing countries (agriculture, manufacturing and services sectors) on income inequality and test the Kuznets hypothesis in terms of sector growth and at the same time, examine the existence of a linear/nonlinear effect of inflation and sectoral economic growth on income inequality and test Granger causality relationship between income inequality and sector growth and inflation.

Details

Journal of Economic Studies, vol. 46 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 2 August 2019

Sima Siami-Namini and Darren Hudson

The purpose of this paper is to investigate both linear and/or nonlinear effects of inflation on income inequality and to test the Kuznets hypothesis using panel data of 24…

3401

Abstract

Purpose

The purpose of this paper is to investigate both linear and/or nonlinear effects of inflation on income inequality and to test the Kuznets hypothesis using panel data of 24 developed countries (DCs) and 66 developing countries (LDCs) observed over the period of 1990–2014.

Design/methodology/approach

This paper explores the short- and long-run Granger causality relationship between inflation and income inequality using the Toda and Yamamoto (1995) procedure and a Vector Error Correction Model (VECM) approach. The existence of a nonlinear relationship between inflation and income inequality is confirmed implying as inflation rises income inequality decreases. Income inequality then reaches a minimum and then starts rising again. The findings of this paper show the existence of Kuznets “U-shaped” hypothesis between income inequality and real GDP per capita in DCs group, and the existence of Kuznets’ inverted “U-shaped” hypothesis for LDCs group.

Findings

The results indicate that there is no bi-directional Granger causality between inflation and income inequality in the short-run, but, there is bi-directional Granger causality in the long-run for both the DCs and LDCs group. The results help us to assess the effectiveness of monetary policy in reducing income inequality in both the DCs and LDCs group. As a policy implication, monetary policy is often aimed at controlling the annual rate of inflation in the long-run with a short-run focus on reducing output gaps and creating employment. However, managing inflation may have implications for income inequality.

Originality/value

This is original research paper which analyzes the “U-shaped” and inverted “U-shaped” paths of income inequality and real GDP per capita for large sample of two group countries including developed and developing countries, respectively. Also, this paper analyzes the nonlinear relationship between inflation and income inequality in two groups. Furthermore, this paper investigates the short- and long-run relationship between variables. The results are important for policy makers.

Details

Journal of Economic Studies, vol. 46 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 9 April 2019

Rolando Gonzales and Andrea Rojas-Hosse

The purpose of this paper is to analyze the effects of inflationary shocks on inequality, using data of selected countries of the Middle East and North Africa (MENA).

Abstract

Purpose

The purpose of this paper is to analyze the effects of inflationary shocks on inequality, using data of selected countries of the Middle East and North Africa (MENA).

Design/methodology/approach

Inflationary shocks were measured as deviations from core inflation, based on a genetic algorithm. Bayesian quantile regression was used to estimate the impact of inflationary shocks in different levels of inequality.

Findings

The results showed that inflationary shocks substantially affect countries with higher levels of inequality, thus suggesting that the detrimental impact of inflation is exacerbated by the high division of classes in a country.

Originality/value

The study contributes to the literature about the relationship between inflation and inequality by proposing that not only the sustained increase in prices but also the inflationary shocks – the deviations from core inflation – contribute to the generation of inequality. Also, to the best of the authors knowledge, the relationship between inflation shocks and inequality in the MENA region has never been analyzed before, thus creating a research gap to provide additional empirical evidence about the sources of inequality. Additionally, the authors contribute with a methodological approach to measure inflationary shocks, based on a semelparous genetic algorithm.

Details

African Journal of Economic and Management Studies, vol. 10 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 3 April 2020

Anwar Hasan Abdullah Othman, Syed Musa Alhabshi, Salina Kassim, Adam Abdullah and Razali Haron

This study uses the autoregressive distributed lag model (ARDL) econometric approach to investigate empirically the effects of cryptocurrencies, the gold standard and traditional…

2052

Abstract

Purpose

This study uses the autoregressive distributed lag model (ARDL) econometric approach to investigate empirically the effects of cryptocurrencies, the gold standard and traditional fiat money on global income inequality measured based on the Gini coefficient, and various ratios of income inequality distribution such as top 1 per cent, top 10 per cent, top 40 per cent and top 50 per cent.

Design/methodology/approach

The study uses the ARDL econometric approach.

Findings

The findings indicated that cryptocurrency and gold standard monetary systems contributed significantly to reducing global inequality of income and wealth distribution. Conversely, the traditional fiat money system contributes positively to global income and wealth inequality while also contributing significantly to their fluctuation.

Practical implications

This suggests that the fiat monetary system results in the coercive redistribution of income and wealth if governments pursue a social welfare policy. They must resolve this conflict between the current fiat monetary system and social policy by opting for an alternative monetary system such as cryptocurrency or gold standard. These alternative monetary systems offer the promise of resolving the income and wealth inequality associated with the traditional monetary system which are accompanied with the channels of inflation, lack of financial inclusion and debt creation, and to offer a more sustainable financial system.

Originality/value

The study recommends that monetary policy must be revisited to account for its direct effect on income and wealth redistribution to achieve social welfare goals.

Details

International Journal of Emerging Markets, vol. 15 no. 6
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 23 May 2023

Shahryar Zaroki, Arman Yousefi Barfurushi and Mastaneh Yadollahi Otaghsara

The present study investigates the role of fiscal illusion on income inequality in 46 selected countries in terms of income and development levels from 2002 to 2017.

Abstract

Purpose

The present study investigates the role of fiscal illusion on income inequality in 46 selected countries in terms of income and development levels from 2002 to 2017.

Design/methodology/approach

The effect of fiscal illusion on income inequality is tested using the two-step system generalized method of moment (SYS-GMM) estimator.

Findings

The findings reveal the negative effect of fiscal illusion on income inequality, which means increasing fiscal illusion decreases income inequality in 46 selected countries. As in other countries, income inequality declines when fiscal illusion increases in high-income and developed countries, although the redistributive effect of fiscal illusion is more in high-income and developed countries than in other countries. In addition, the results demonstrate the positive effect of unemployment, urbanization and inflation as well as the negative effect of trade openness on income inequality in all three models.

Originality/value

Previous studies have examined the role of government in controlling income inequality from different perspectives; however, no study has detected the role of government in income distribution regarding fiscal illusion.

Peer review

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-05-2022-0311.

Details

International Journal of Social Economics, vol. 50 no. 11
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 2 April 2021

Konstantina Liosi and Spyros Spyrou

This study examines the impact of monetary policy on income inequality in Eurozone countries for the period between 2005 and 2017.

Abstract

Purpose

This study examines the impact of monetary policy on income inequality in Eurozone countries for the period between 2005 and 2017.

Design/methodology/approach

The authors use regression analysis, panel vector autoregression (PVAR) analysis and impulse response functions, in order to examine the impact of monetary policy on income inequality in Eurozone countries.

Findings

This study examines the impact of monetary policy on income inequality in Eurozone countries for the period between 2005 and 2017. The results indicate that, on average, monetary policy tends to increase income inequality. A closer examination indicates that for Ireland, Germany and the Netherlands monetary policy has no impact on income inequality or a weak impact (France), while for Spain, Portugal, Greece and Italy the impact is more pronounced. PVAR analysis and impulse response functions further indicate that female income inequality responds more significantly to monetary policy.

Originality/value

In contrast to previous studies the authors estimate separate models for males, females and the total population to evaluate whether gender is an important factor. Furthermore, the authors use two proxies for monetary policy: the shadow rate (SR) and the total assets (TAs) of the central bank.

Details

Journal of Economic Studies, vol. 49 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 8 July 2014

Simplice Asongu

Poverty and inequality undoubtedly remain substantial challenges to economic and human developments amid growing emphasis on intellectual property rights (IPRs) (with recent…

1024

Abstract

Purpose

Poverty and inequality undoubtedly remain substantial challenges to economic and human developments amid growing emphasis on intellectual property rights (IPRs) (with recent advances in information and communication technology (ICTs)) and good governance. In the first empirical study on the incidence of piracy on inequality in Africa, the purpose of this paper is to examine how a plethora of factors (IPRs laws, education and ICTs and government quality) are instrumental in the piracy-inequality nexus.

Design/methodology/approach

Two-stage least squares estimation approaches are applied in which piracy is instrumented with IPRs regimes (treaties), education and ICTs and government quality dynamics.

Findings

The main finding suggests that, software piracy is good for the poor as it has a positive income-redistributive effect; consistent with economic and cultural considerations from recent literature. ICTs and education (dissemination of knowledge) are instrumental in this positive redistributive effect, while good governance mitigates inequality beyond the piracy channel.

Practical implications

As a policy implication, in the adoption IPRs, sampled countries should take account of the role less stringent IPRs regimes play on income-redistribution through software piracy. Collateral benefits include among others, the cheap dissemination of knowledge through ICTs which African countries badly need in their quest to become “knowledge economies.” A caveat, however, is that, too much piracy may decrease incentives to innovate. Hence, the need to adopt tighter IPRs regimes in tandem with increasing income-equality.

Originality/value

It is the first empirical assessment of the incidence of piracy on inequality in Africa: a continent with stubbornly high poverty and inequality rates.

Details

Journal of Economic Studies, vol. 41 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 13 May 2019

Lawal Adedoyin Isola, Babajide Abiola Ayopo, Asaleye Abiola and IseOlorunkanmi O. Joseph

Recent evidences show that terrorism is becoming frequent in Nigeria, ranging from incessant Boko Haram activities in the North East; Independent People of Biafra (IPOB…

Abstract

Recent evidences show that terrorism is becoming frequent in Nigeria, ranging from incessant Boko Haram activities in the North East; Independent People of Biafra (IPOB) activities in the South-East states, kidnapping and vandalizing oil pipes in the South-South, Fulani-herdsmen attacks in the Middle Belt, among others. In an attempt to tackle terrorism, the Federal Government at different times adopted military actions with little or no lasting solution. The Have and Have-nots hypothesis (Shahbaz, 2013) stresses the role of economic phenomenon in determining the causes of terrorism. It is on this note that this chapter investigates the linkages between economic growth proxy by gross domestic product per capita (GDPPC) and other fundamental variables such as inflation, unemployment, and inequality gaps, among others; and terrorism in Nigeria. We intend to know whether cointegration exists between the two constructs; and if it does, is there causality? The study employed both the autoregressive distributed lag (ARDL) and the vector error correction model (VECM) approaches to examine the existence of or otherwise a long-run relationship as well as causality among the constructs. Results reveal that a compelling cointegrating relationship exists among the variables. It is further revealed that unemployment, inequality, poverty, inflation, among others, Granger cause terrorism. It stresses that the Have-not hypothesis explained the causes of terrorism in Nigeria. The study therefore suggests that policy makers should, in order to prevent or combat terrorism, focus on improving the economy by creating job opportunities through provision of conducive environment that supports businesses and reduces inequality gaps.

Details

The Impact of Global Terrorism on Economic and Political Development
Type: Book
ISBN: 978-1-78769-919-9

Keywords

Article
Publication date: 12 January 2015

Michael Enowbi Batuo and Simplice A. Asongu

The purpose of this paper is to investigate the impact of liberalisations policies on income inequality in African countries. Examining whether the liberalisations policies have…

2106

Abstract

Purpose

The purpose of this paper is to investigate the impact of liberalisations policies on income inequality in African countries. Examining whether the liberalisations policies have affected the income distribution of everyone equally or they only assist those who are already relatively well off; leaving the poor behind. The authors also examine how they affect income distribution in the various countries within the continent, and their effect on short and long runs?

Design/methodology/approach

First, The authors used the before and after comparison, to examine the response of the level of income inequality and the volatility of income inequality from the time that financial or trade liberalisations took place in each country. Next, the authors used the panel data techniques model for a sample of 26 African countries spanning the period 1996-2010 to investigate the effect of liberalisation policies on income distribution.

Findings

The authors find that financial liberalisation has a levitated income-redistributive effect with the magnitude of the de jure measure (KAOPEN) higher than that of the de facto measure (FDI); that exports, trade and “freedom to trade” have an equality incidence on income distribution; and that institutional and/or political liberalisation has a negative impact and; economic freedom has a negative income-redistributive effect, possibly because of the weight of its legal component.

Practical implications

In general, this study provides a variegated picture, findings tend to suggest that overall the reforms have increased income inequality in African countries. It would be risky to prescribe a general policy because of the diversity of the country. However, African countries’ better performance can be attributed to a combination of policies. For example avoiding the Marco price mixture of real exchange rate appreciation and high domestic interest rates; having capital controls and prudential financial regulations which would enable them to contain the negative consequence of capital flows; putting a system in place to direct export between African countries and encouraging sub regional integration agreement. The government should put in place countervailing social policies in order to withstand social coherence and smooth the adverse transition of liberalisation policies.

Originality/value

Three main elements of originality clearly standout: first, the estimation approach used in the paper considers both short- and long-run effects of in empirical strategy; second, an exhaustive plethora of liberalisation policies (trade, financial, political and institutional are considered); and third, recent data are used to appraise second generation reforms for more updated policy implications.

Details

Journal of Economic Studies, vol. 42 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

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