A Bayesian copula-based modelling for income concentration and inequality indexes

The linearity of the relationship between income inequality and economic development has been long questioned. While theory provides arguments for which the shape of the relationship may be positive for low levels of inequality and negative for high ones, most of the empirical literature assumes a linear specification finding conflicting results. Employing an innovative empirical approach, robust to endogeneity, we find pervasive evidence of nonlinearities. In particular, similar to the debt-overhang literature, we identify an inequality-overhang level, in that the slope of the relationship between income inequality and economic development switches from positive to negative at a net Gini coefficient of about 27 per cent. We also find that in an environment characterized by widespread financial inclusion and high income concentration, rising income inequality has a larger negative impact on economic development because banks may curtail credit to customers at the lower end of the income distribution. On the positive side, a sufficiently high female labor participation can act as a shock absorber reducing such a negative impact, possibly through a more efficient allocation of resources.

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The Rise of the Super-Rich

American Sociological Review ◽

10.1177/0003122412458508 ◽

2012 ◽

Vol 77 (5) ◽

pp. 679-699 ◽

Cited By ~ 151

Author(s):

Thomas W. Volscho ◽

Nathan J. Kelly

Keyword(s):

Trade Openness ◽

The United States ◽

Single Equation ◽

Economic Factors ◽

Tax Rates ◽

Real Estate Markets ◽

Asset Bubbles ◽

Equation Error ◽

Short Run ◽

Income Concentration

The income share of the super-rich in the United States has grown rapidly since the early 1980s after a period of postwar stability. What factors drove this change? In this study, we investigate the institutional, policy, and economic shifts that may explain rising income concentration. We use single-equation error correction models to estimate the long- and short-run effects of politics, policy, and economic factors on pretax top income shares between 1949 and 2008. We find that the rise of the super-rich is the result of rightward-shifts in Congress, the decline of labor unions, lower tax rates on high incomes, increased trade openness, and asset bubbles in stock and real estate markets.

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Catching up, falling behind: the need to build upgrading coalitions for innovation and inclusive development in South Africa

Nova Economia ◽

10.1590/0103-6351/6191 ◽

2020 ◽

Vol 30 (spe) ◽

pp. 1115-1144

Author(s):

Glenda Kruss

Keyword(s):

South African ◽

Informal Economy ◽

Local Economic Development ◽

Inclusive Development ◽

Middle Income ◽

Catching Up ◽

Open Debate ◽

Catch Up ◽

Middle Income Trap ◽

Income Concentration

Abstract Through analysis of the South African case, a country stalled in a middle income trap, the paper aims to add to the literature on catch-up. It uses Albuquerque’s (2019) model of the vicious cycles arising from inequality and income concentration, together with the notion of ‘upgrading coalitions’ (Doner and Schneider 2016) required to challenge these vicious cycles, to analyse the persistence of lock-ins. It then analyses a global astronomy project, a ‘window of opportunity’ building on historically grown capabilities, promoted by ‘upgrading coalitions’ operating in the national interest. In contrast, it proposes a ‘detour’ to build domestic capabilities, driven by an upgrading coalition centred on local economic development and livelihoods in the informal economy. The paper aims to reinforce the evidence on how inequality is both a cause and consequence of a middle income trap, and open debate on how upgrading coalitions may be a critical strategy for breaking lock-ins.

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The Limits of Income Inequality: Public Support for Social Policy across Rich Democracies

10.31235/osf.io/rbpj5 ◽

2017 ◽

Author(s):

Nate Breznau ◽

Carola Hommerich

Keyword(s):

Public Opinion ◽

Income Inequality ◽

Social Welfare ◽

Public Support ◽

The Public ◽

The Social ◽

Liberal Societies ◽

Institutional Contexts ◽

English Speaking ◽

Income Concentration

Does public opinion react to inequality, and if so, how? The social harms caused by increasing inequality should cause public opinion to ramp up demand for social welfare protections. However, the public may react to inequality differently depending on institutional context. Using ISSP and WID data (1980-2006) we tested these claims. In liberal institutional contexts (mostly English-speaking), increasing income inequality predicted higher support for state provision of social welfare. In coordinated and universalist contexts (mostly of Europe), increasing inequality predicted less support. Historically higher income concentration predicted less public support, providing an account of the large variation in inequality within the respective liberal and coordinated contexts. The results suggest opinions in liberal societies – especially with higher historical inequality – reached the limits of inequality, reacting negatively; whereas in coordinated/universalist societies – especially with lower historical inequality – opinions moved positively, as if desiring more inequality.

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Inequality in tax evasion: the case of the Spanish income tax

Applied Economic Analysis ◽

10.1108/aea-01-2020-0007 ◽

2020 ◽

Vol 28 (83) ◽

pp. 89-109

Author(s):

Sara Torregrosa-Hetland

Keyword(s):

Tax Evasion ◽

Income Tax ◽

Sample Selection ◽

Composition Effect ◽

Content Type ◽

Top Incomes ◽

Self Employment ◽

Real Value ◽

Measurement Of Inequality ◽

Income Concentration

Purpose The purpose of this paper is to estimate tax evasion and its impact on progressivity, redistribution and the measurement of inequality, using microdata from the Spanish income tax for 2001-2004. Design/methodology/approach The approach follows Feldman and Slemrod (2007) by exploiting the relation of charitable donations with the composition of income but introduces two methodological innovations, which could be useful for further studies: correction for sample selection with a Heckman two-step setting and the calculation of different evasion rates for top incomes with an interaction term. Findings Evasion in capital incomes was significant throughout these years. Financial incomes were reported at around 50-70 per cent of their real value, with the lowest estimates corresponding to the top decile. Revenues from fixed capital display similarly low compliance rates for the top 10 per cent. Tax evasion in self-employment incomes (direct assessment) is estimated at 20 per cent for 2001. Mostly because of a composition effect, this means that fraud was higher at the top of the income distribution, thus having a regressive impact. Inequality statistics and top income concentration estimates should, therefore, be revised upwards. Originality/value This is the first paper to estimate the distributive impacts of tax evasion in Spain, and one of very few internationally.

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