Fluctuations, uncertainty and income inequality in developing countries

Fadi Fawaz, Masha Rahnamamoghadam, Victor Valcarcel

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

We analyze income inequality and high frequency movements in economic activity for low and high income developing countries (LIDC and HIDC). The impact of human capital, capital formation, and economic uncertainty on income inequality for LIDC and HIDC are also evaluated. We find strong evidence that business cycle fluctuations serve to exacerbate income inequality in HIDC while they help narrow the gap in LIDC. Importantly, volatility in output widens inequality across the board but to a consistently higher degree in HIDC. Schooling helps reduce income inequality in both country groups, while investment increases income inequality. Lastly, the Kuznets inverted U-curve hypothesis is confirmed for both LIDC and HIDC.

Original languageEnglish
Pages (from-to)495-511
Number of pages17
JournalEastern Economic Journal
Volume38
Issue number4
DOIs
StatePublished - Sep 2012

Keywords

  • Gini coefficient
  • business cycles
  • income inequality
  • output volatility

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