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The heterogeneous relationship between income and inequality: a panel co-integration approach

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We study the relationship between per-capita income and income inequality with a heterogeneous panel co-integration approach. We extend previous studies in two dimensions: first, we compile a more extensive data set for 61 countries over 26-51 years and consider measures for both pre-tax and post-tax income inequality; second, we take into account country heterogeneity rather than relying on average panel estimates alone. We find a negative group-mean based relationship using pre-tax income inequality, but no such relationship for post-tax income inequality. Moreover, we find estimates on the country level to be heterogeneous in both cases.

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  • Svenja Flechtner & Claudius Graebner, 2019. "The heterogeneous relationship between income and inequality: a panel co-integration approach," ICAE Working Papers 91, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    • Handle: RePEc:ico:wpaper:91
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    Cited by:

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    More about this item

    Keywords

    Development; Inequality; Growth; Panel co-integration;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F5 - International Economics - - International Relations, National Security, and International Political Economy

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