Economic Freedom and Income Inequality: Evidence from a Panel of Global Economies — A Linear and a Non‐Linear Long‐Run Analysis

18 Pages Posted: 7 Dec 2016

See all articles by Nicholas Apergis

Nicholas Apergis

Northumbria University - Economics Department

Arusha V. Cooray

Embassy of Sri Lanka, Oslo

Date Written: January 2017

Abstract

This study employs panel data from 138 countries (with unbalanced time frameworks) to investigate the relationship between economic freedom and income inequality. Both linear and non‐linear cointegration methodologies are used to identify a long‐run equilibrium relationship between: (i) the overall Economic Freedom of the World index and income inequality, and (ii) the major areas of the index and income inequality. The linear long‐run parameter estimates document that the association turns out to be negative, while the non‐linear long‐run parameter estimates illustrate that above a threshold point the association between economic freedom and income inequality is negative, while below this threshold point, the association turns out to be positive. The empirical findings survive a number of robustness tests, such as alternative measures of income inequality.

Suggested Citation

Apergis, Nicholas and Cooray, Arusha V., Economic Freedom and Income Inequality: Evidence from a Panel of Global Economies — A Linear and a Non‐Linear Long‐Run Analysis (January 2017). The Manchester School, Vol. 85, Issue 1, pp. 88-105, 2017. Available at SSRN: https://ssrn.com/abstract=2881029 or http://dx.doi.org/10.1111/manc.12137

Nicholas Apergis (Contact Author)

Northumbria University - Economics Department ( email )

Newcastle-Upon-Tyne, NE1 8ST
United Kingdom

Arusha V. Cooray

Embassy of Sri Lanka, Oslo ( email )

Norway

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