National income and its distribution

Markus Brueckner, Era Dabla Norris and Mark Gradstein ()
Authors registered in the RePEc Author Service: Markus Brueckner

Journal of Economic Growth, 2015, vol. 20, issue 2, 149-175

Abstract: This paper revisits the effect of national income on distributional equality. Although the link between the two has featured prominently in the literature, a causal effect has been difficult to pin down due to the endogeneity of these variables. We use plausibly exogenous variations in the incomes of countries’ trading partners weighted by the level of trade flows, and international oil price shocks, as instruments for within-country variations in countries’ real GDP per capita. Controlling for country and time fixed effects, our instrumental variables regressions show that increases in national income have a significant moderating effect on income inequality: a 1 % increase in real GDP per capita reduces the Gini coefficient by around 0.08 percentage points on average. We document that education is one possible channel that mediates this relationship, and explore the implications of our findings for the welfare effect of national income growth. Copyright Springer Science+Business Media New York 2015

Keywords: National income; Inequality; Economic growth; Income distribution; O4; Oll (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (25)

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Working Paper: National Income and Its Distribution (2014)
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DOI: 10.1007/s10887-015-9113-4

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