Economic Complexity and Income Inequality: Does Country Risk Matter?
- PDF / 808,697 Bytes
- 26 Pages / 439.37 x 666.142 pts Page_size
- 46 Downloads / 225 Views
Economic Complexity and Income Inequality: Does Country Risk Matter? Chien‑Chiang Lee1,2 · En‑Ze Wang3 Accepted: 1 November 2020 © Springer Nature B.V. 2020
Abstract This research sets out to determine the nexus among economic complexity (ECI; which reflects a country’s productivity), income inequality, and country risk and whether country risk affects the complexity-inequality nexus. By applying balanced panel data of 43 countries from 1991 to 2016 to a data-driven econometric methodology-finite mixture model, we provide fresh insight into this relationship from the perspective of country risk. The results indicate that the two-group finite mixture model is able to best fit our data, and that increasing economic complexity has no impact on income inequality in group A, whereas improving the structure of productivity mitigates the income gap in group B. Furthermore, country risk and the subcomponents of the former (i.e., economic risk, financial risk, and political risk) all exert effects on the complexity-inequality nexus. Specifically speaking, an increase in ECI is associated with more equal income distribution in a country with low country risk, while the improvement in productive structure cannot improve an unequal income distribution in countries under high country risk. Finally, it is noteworthy that the finite mixture model also captures information about the transformation of this nexus, with evidence demonstrating that 5 countries experience a variation in their complexity-inequality relationship over the sample period. Keywords Income inequality · Economic complexity · Country risk · Finite-mixture model · Heterogeneity JEL classification O15 · O4 · G00 · G51 The authors are listed in alphabetical order and share first authorship. This paper is supported by the National Science Foundation of Jiangxi Province of China [20202BAB201006] and the 2020 Jiangxi Humanities and Social Sciences Project of University. * En‑Ze Wang [email protected] Chien‑Chiang Lee [email protected] 1
Research Center of the Central China for Economic and Social Development, Nanchang University, Nanchang, China
2
School of Economics and Management, Nanchang University, Nanchang, China
3
Economics and Management School, Wuhan University, Wuhan, Hubei, People’s Republic of China
13
Vol.:(0123456789)
C.-C. Lee, E.-Z. Wang
1 Introduction In the history of economics, income distribution has always been thought of as a vital concern of economic theory. In his innovative and seminal work, Kuznets (1955) pioneers a new theory discussing the growth-inequality nexus and proposed that income inequality first increases and then decreases during the course of economic development. Recent years have witnessed a renewed academic interest in this problem of income inequality, with a bulk of published studies investigating the influential factors of income distribution such as foreign direct investment, trade openness, employment, life expectancy, and so on (Lee and Lee 2018; Raza et al. 2017; Delis et al. 2014; Dreher and
Data Loading...
