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Panel Data Analysis Of The Human Capital Index And Income Inequality: A Panel Of 203 Countries For The Period 1988-2018

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  • Brandon PARSONS

Abstract

The study uses the Human Capital Index to explain the net and market Gini coefficient. The unbalanced panel includes 103 countries from 1988 to 2018 with different panels based on income and region. The econometric model employs two-way fixed effects and Driscoll and Kraay standard errors to account for heteroscedasticity, serial correlation, and cross-sectional dependence. The study finds that the Human Capital Index has an indirect relationship with the net and market Gini coefficients in most cases. Low income and African countries have a direct relationship with Gini coefficients. The direct relationship may demonstrate a more prominent labor composition effect. The statistically significant market (before tax and transfer) Gini coefficient results suggest human capital has a labor market effect that influences income distribution even before tax and redistribution policy. Additionally, there are fewer cases of statistical significance when returns to education are removed, and gross enrollment is the education measure.

Suggested Citation

  • Brandon PARSONS, 2023. "Panel Data Analysis Of The Human Capital Index And Income Inequality: A Panel Of 203 Countries For The Period 1988-2018," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 23(1), pages 5-32.
    • Handle: RePEc:eaa:aeinde:v:23:y:2023:i:1_1
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    More about this item

    Keywords

    Income Inequality; human capital; tertiary; primary; secondary;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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