National Income and its Distribution

45 Pages Posted: 18 Jul 2014

See all articles by Markus Brueckner

Markus Brueckner

National University of Singapore (NUS)

Era Dabla-Norris

International Monetary Fund (IMF)

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: June 2014

Abstract

Does the distribution of income within a country become more equal as it grows richer? This paper uses plausibly exogenous variations in trade-weighted world income and international oil price shocks as instruments for within-country variations in countries' real GDP per capita to examine this issue for a large sample of advanced and developing countries. Our findings indicate that increases in national income have a significant moderating effect on income inequality: a one percent increase in real GDP per capita, on average, reduces the Gini coefficient by around 0.08 percentage points, a result that is robust across income levels, different time horizons, and alternative estimation techniques. From a policy perspective, our results suggest that education policies that promote equity and help individuals continue on to higher levels of education could help reduce income inequality.

Keywords: National income, Income distribution, Income inequality, Economic growth, Econometric models, inequality, growth, gini, gini coefficient, dependent variable, income growth, distribution of income, human capital, consumption expenditures, inequality data, descriptive statistics, poverty headcount ratio, world income inequality, inequality reduction, inequality-development relationship, explaining inequality, levels of inequality, changes in inequality, inequality-reducing effect, inequality relationship, growth-inequality relationship, kuznets curve, country inequality, intergenerational earnings mobility, inequality declines, inequality measures, growth pro-poor, government spending, redistr

JEL Classification: D31, O11, O15

Suggested Citation

Brueckner, Markus and Dabla-Norris, Era and Gradstein, Mark, National Income and its Distribution (June 2014). IMF Working Paper No. 14/101, Available at SSRN: https://ssrn.com/abstract=2468008

Markus Brueckner

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

Era Dabla-Norris

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+97 2 8647 2288 (Phone)
+97 2 8647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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