Income Inequality and Persistence Changes
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Income Inequality and Persistence Changes Marcos Sanso‑Navarro1 · María Vera‑Cabello2 Accepted: 13 July 2020 © Springer Nature B.V. 2020
Abstract This paper carries out a time series analysis of the Gini coefficient for disposable income in a sample that includes both advanced and emerging economies. Our results show that, in most countries, inequality has alternated between stationary and nonstationary regimes during the period 1960–2017. These changes coincide with the implementation of structural reforms and with periods of economic and, especially, financial distress. Our findings also suggest that the persistence of income inequality seems to be related to tax progressivity, income for top earners, and working conditions. Keywords Inequality · Gini coefficient · Disposable income · Unit roots · Structural breaks JEL Classification C12 · C22 · D63
1 Introduction The unequal distribution of income and wealth has attracted the attention of academics in the last four decades, especially after the Great Recession. The main reason for this is that economic inequality can lead to political, economic, and social unrest (Alvaredo et al. 2018). In fact, one of the goals established in the 2030 Agenda for Sustainable Development, adopted by the member states of the United Nations in September 2015, is to reduce inequality both within and among countries. The importance of adopting an economic standpoint in the study of inequality has become clear as, with greater data availability, researchers have found it is related to growth (Banerjee and Duflo 2003), financial crises (Rajan 2011), happiness (Ferrer-i-Carbonell and Ramos 2014), family composition (Cornelson and Siow 2016) and terrorism (Ezcurra and Palacios 2016), among other issues. Piketty and Saez (2014) review the long-run evolution of inequality, focusing on Europe and the United States (US). One of the main conclusions drawn by these authors is that inequality does not follow a deterministic process. This claim has fostered a recent strand * Marcos Sanso‑Navarro [email protected] María Vera‑Cabello [email protected] 1
Departamento de Análisis Económico, Universidad de Zaragoza, Zaragoza, Spain
2
Centro Universitario de la Defensa de Zaragoza, Zaragoza, Spain
13
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M. Sanso‑Navarro, M. Vera‑Cabello
of the literature that deals with the persistence of income inequality through the study of its order of integration. In particular, Islam et al. (2015) applied panel stationarity tests to several measures of inequality in a sample of 21 OECD countries during 1870–2011. These authors did not find evidence against the null hypothesis of trend stationarity, concluding that shocks to income inequality induce temporary effects. This result brings into question the assertion that inequality contains a stochastic trend. In a related work, Christopoulos and McAdam (2017) analyzed the persistence of the Gini coefficient for both gross and net income in an unbalanced panel covering 47 countries over the period 1975–2013. These authors were not
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