Income Inequality and External Wealth of Nations

Carrera Jorge, Gabriel Montes-Rojas (), Panigo Demian and Toledo Fernando
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Carrera Jorge: Universidad Nacional de La Plata, La Plata, Argentina
Panigo Demian: Universidad Nacional de La Plata, La Plata, Argentina
Toledo Fernando: Universidad Nacional de La Plata, La Plata, Argentina

Journal of Globalization and Development, 2024, vol. 15, issue 1, 47-62

Abstract: We study the relationship between income inequality and external wealth using dynamic panel data models with 5-years average observations to consider the slow motion of available data in the case of 88 emerging and developing economies for the period 1970–2020. We find evidence of a significant positive association between inequality indicators and net external wealth. This relationship is statistically significant for all income inequality measures and net external wealth variables. If the Top 1 of the richest individuals in a given country increments their share by 1 % point this will produce an average same-year increment in net foreign assets of 0.45 % in terms of the country’s GDP. The long-run effect is more than double in magnitude (1.05 % of GDP). For the Top 10, the long-run effect increases tenfold (11.6 % of GDP). When disaggregated into foreign assets and liabilities, we find a heterogeneous behavior of the financial elites. These findings reveal that financialized elites have a greater propensity to accumulate external wealth than the rest of the population.

Keywords: income inequality; net external wealth; panel data models (search for similar items in EconPapers)
JEL-codes: C23 F21 O15 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Income Inequality and External Wealth of Nations (2023)
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DOI: 10.1515/jgd-2023-0042

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