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Income Inequality and External Wealth of Nations

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  • Montes Rojas Gabriel
  • Carrera Jorge
  • Panigo Demián
  • Solla Mariquena
  • Toledo Fernando

Abstract

We study the relationship between income inequality and external wealth using dynamic panel data models with annual observations of 88 emerging and developing economies for the period 1970-2020. We find evidence in favor of a significant and 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 percentage 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.

Suggested Citation

  • Montes Rojas Gabriel & Carrera Jorge & Panigo Demián & Solla Mariquena & Toledo Fernando, 2023. "Income Inequality and External Wealth of Nations," Asociación Argentina de Economía Política: Working Papers 4675, Asociación Argentina de Economía Política.
    • Handle: RePEc:aep:anales:4675
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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