IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0182774.html
   My bibliography  Save this article

Economic development and wage inequality: A complex system analysis

Author

Listed:
  • Angelica Sbardella
  • Emanuele Pugliese
  • Luciano Pietronero

Abstract

Adapting methods from complex system analysis, this paper analyzes the features of the complex relationship between wage inequality and the development and industrialization of a country. Development is understood as a combination of a monetary index, GDP per capita, and a recently introduced measure of a country’s economic complexity: Fitness. Initially the paper looks at wage inequality on a global scale, over the time period 1990–2008. Our empirical results show that globally the movement of wage inequality along with the ongoing industrialization of countries has followed a longitudinally persistent pattern comparable to the one theorized by Kuznets in the fifties: countries with an average level of development suffer the highest levels of wage inequality. Next, the study narrows its focus on wage inequality within the United States. By using data on wages and employment in the approximately 3100 US counties over the time interval 1990–2014, it generalizes the Fitness-Complexity metric for geographic units and industrial sectors, and then investigates wage inequality between NAICS industries. The empirical time and scale dependencies are consistent with a relation between wage inequality and development driven by institutional factors comparing countries, and by change in the structural compositions of sectors in a homogeneous institutional environment, such as the counties of the United States.

Suggested Citation

  • Angelica Sbardella & Emanuele Pugliese & Luciano Pietronero, 2017. "Economic development and wage inequality: A complex system analysis," PLOS ONE, Public Library of Science, vol. 12(9), pages 1-26, September.
    • Handle: RePEc:plo:pone00:0182774
    DOI: 10.1371/journal.pone.0182774
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0182774
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0182774&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0182774?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. Acemoglu, Daron, 1997. "Matching, Heterogeneity, and the Evolution of Income Distribution," Journal of Economic Growth, Springer, vol. 2(1), pages 61-92, March.
    3. Birdsall, Nancy & Londono, Juan Luis, 1997. "Asset Inequality Matters: An Assessment of the World Bank's Approach to Poverty Reduction," American Economic Review, American Economic Association, vol. 87(2), pages 32-37, May.
    4. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    5. Galor, Oded & Tsiddon, Daniel, 1997. "The Distribution of Human Capital and Economic Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 93-124, March.
    6. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    7. Robinson, Sherman, 1976. "A Note on the U Hypothesis Relating Income Inequality and Economic Development," American Economic Review, American Economic Association, vol. 66(3), pages 437-440, June.
    8. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
    9. Hartmann, Dominik & Guevara, Miguel R. & Jara-Figueroa, Cristian & Aristarán, Manuel & Hidalgo, César A., 2017. "Linking Economic Complexity, Institutions, and Income Inequality," World Development, Elsevier, vol. 93(C), pages 75-93.
    10. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    11. Galbraith, James K., 2007. "Global inequality and global macroeconomics," Journal of Policy Modeling, Elsevier, vol. 29(4), pages 587-607.
    12. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
    13. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    14. Ross, D. & Sabot, R. & Birdsall, N., 1995. "Inequality and Growth Reconsidered," Center for Development Economics 142, Department of Economics, Williams College.
    15. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
    16. Thomas Piketty & Emmanuel Saez, 2014. "Inequality in the long run," PSE-Ecole d'économie de Paris (Postprint) halshs-01053609, HAL.
    17. Birdsall, Nancy & Ross, David & Sabot, Richard, 1995. "Inequality and Growth Reconsidered: Lessons from East Asia," The World Bank Economic Review, World Bank, vol. 9(3), pages 477-508, September.
    18. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    19. Sukkoo Kim, 1995. "Expansion of Markets and the Geographic Distribution of Economic Activities: The Trends in U. S. Regional Manufacturing Structure, 1860–1987," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 881-908.
    20. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    21. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    22. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
    23. Emanuele Pugliese & Andrea Zaccaria & Luciano Pietronero, 2014. "On the convergence of the Fitness-Complexity Algorithm," Papers 1410.0249, arXiv.org, revised Dec 2014.
    24. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    25. Emanuele Pugliese & Guido L Chiarotti & Andrea Zaccaria & Luciano Pietronero, 2017. "Complex Economies Have a Lateral Escape from the Poverty Trap," PLOS ONE, Public Library of Science, vol. 12(1), pages 1-18, January.
    26. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," The World Bank Economic Review, World Bank, vol. 11(2), pages 357-382, May.
    27. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    28. Summers, Robert & Kravis, Irving B. & Heston, Alan, 1984. "Changes in the world income distribution," Journal of Policy Modeling, Elsevier, vol. 6(2), pages 237-269, May.
    29. Matthieu Cristelli & Andrea Gabrielli & Andrea Tacchella & Guido Caldarelli & Luciano Pietronero, 2013. "Measuring the Intangibles: A Metrics for the Economic Complexity of Countries and Products," PLOS ONE, Public Library of Science, vol. 8(8), pages 1-20, August.
    30. Philippe Aghion & Peter Howitt, 1998. "Market Structure and the Growth Process," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 276-305, January.
    31. Ed Diener & Eunkook Suh, 1997. "Measuring Quality Of Life: Economic, Social, And Subjective Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 40(1), pages 189-216, January.
    32. Cowell, Frank A & Victoria-Feser, Maria-Pia, 1996. "Robustness Properties of Inequality Measures," Econometrica, Econometric Society, vol. 64(1), pages 77-101, January.
    33. James K. Galbraith & Hyunsub Kum, 2003. "Inequality and Economic Growth: A Global View Based on Measures of Pay," CESifo Economic Studies, CESifo Group, vol. 49(4), pages 527-556.
    34. Ahluwalia, Montek S, 1976. "Income Distribution and Development: Some Stylized Facts," American Economic Review, American Economic Association, vol. 66(2), pages 128-135, May.
    35. Andrei Bougrov & Robert Johnson & Benno Ndulo & Pedro Paez & Avinash Persaud & Heidemarie Wieczorek-Zeul & Akhtar Aziz Zeti & Charles Goodhart & Jomo Kwame Sundaram & Youssef Boutros-Ghali & José Anto, 2010. "The Stiglitz Report," SciencePo Working papers Main hal-03415638, HAL.
      • Andrei Bougrov & Robert Johnson & Benno Ndulo & Pedro Paez & Avinash Persaud & Heidemarie Wieczorek-Zeul & Akhtar Aziz Zeti & Charles Goodhart & Jomo Kwame Sundaram & Youssef Boutros-Ghali & José Anto, 2010. "The Stiglitz Report," Working Papers hal-03415638, HAL.
    36. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    37. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    38. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    39. repec:hal:pseose:halshs-01053609 is not listed on IDEAS
    40. Matthieu Cristelli & Andrea Tacchella & Luciano Pietronero, 2015. "The Heterogeneous Dynamics of Economic Complexity," PLOS ONE, Public Library of Science, vol. 10(2), pages 1-15, February.
    41. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    42. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    43. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2013. "Democracy, Redistribution and Inequality," NBER Working Papers 19746, National Bureau of Economic Research, Inc.
    44. Tacchella, A. & Cristelli, M. & Caldarelli, G. & Gabrielli, A. & Pietronero, L., 2013. "Economic complexity: Conceptual grounding of a new metrics for global competitiveness," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1683-1691.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Ravallion, 2013. "The Idea of Antipoverty Policy," NBER Working Papers 19210, National Bureau of Economic Research, Inc.
    2. Angelica Sbardella & Emanuele Pugliese & Luciano Pietronero, 2016. "Economic Development and Inequality: a complex system analysis," Papers 1605.03133, arXiv.org.
    3. Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "Causality Between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 135(1), pages 269-289, January.
    4. Cristiano Perugini & Gaetano Martino, 2008. "Income Inequality Within European Regions: Determinants And Effects On Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 373-406, September.
    5. Bourguignon, Francois, 2005. "The Effect of Economic Growth on Social Structures," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 27, pages 1701-1747, Elsevier.
    6. Nobuhiro Mizuno & Katsuyuki Naito & Ryosuke Okazawa, 2017. "Inequality, extractive institutions, and growth in nondemocratic regimes," Public Choice, Springer, vol. 170(1), pages 115-142, January.
    7. Kang-Kook Lee & Trung V. Vu, 2020. "Economic complexity, human capital and income inequality: a cross-country analysis," The Japanese Economic Review, Springer, vol. 71(4), pages 695-718, October.
    8. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    9. Martin Ravallion, 2012. "Why Don't We See Poverty Convergence?," American Economic Review, American Economic Association, vol. 102(1), pages 504-523, February.
    10. Grabiella Berloffa & Maria Luigia Segnana, 2004. "Trade, inequality and pro-poor growth: Two perspectives, one message?," Department of Economics Working Papers 0408, Department of Economics, University of Trento, Italia.
    11. Jennifer Mbabazi & Oliver Morrissey & Chris Milner, 2001. "Are Inequality and Trade Liberalization Influences on Growth and Poverty?," WIDER Working Paper Series DP2001-132, World Institute for Development Economic Research (UNU-WIDER).
    12. Gravier-Rymaszewska, Joanna & Tyrowicz, Joanna & Kochanowicz, Jacek, 2010. "Intra-provincial inequalities and economic growth in China," Economic Systems, Elsevier, vol. 34(3), pages 237-258, September.
    13. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    14. Martin Baur, 2010. "Politics and Income Distribution," Chapters, in: Neri Salvadori (ed.), Institutional and Social Dynamics of Growth and Distribution, chapter 3, Edward Elgar Publishing.
    15. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
    16. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
    17. Dustin Chambers, 2005. "Inequality and Growth: A Semiparametric Investigation," Computing in Economics and Finance 2005 132, Society for Computational Economics.
    18. Veronica Amarante, 2014. "Revisiting Inequality and Growth: Evidence for Developing Countries," Growth and Change, Wiley Blackwell, vol. 45(4), pages 571-589, December.
    19. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    20. Furquim, Lilian de Toni & Garcia, Fernando, 2001. "Inequality and economic growth in Latin," Textos para discussão 104, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0182774. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.