determinants of inequality
TRANSCRIPT
Determinants of InequalityDeterminants of InequalityFakultät Wirtschaftswissenschaften
Lehrstuhl für Wachstums- und Konjunkturtheorie
Prof. Dr. Thomas Gries – Module W4412 Global Growth
Sherif Elkoumy and Rainer Grundmann 15 Jul 2008
AgendaAgenda
1. Introduction
2. Stylized Facts
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3. Theory
4. Empirics
5. Conclusion
IntroductionIntroduction
• Growth, Urbanization � Increased
• Urbanization leads to social problems
• Change in inequality is a result of
growth and urbanization processes
• Inequality has been an ongoing
concern for economists and scholars
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concern for economists and scholars
worldwide
• Inequality is a part of development
economics
Stylized factsStylized facts
Growth (output) :
World Economic Growth
5
6
7
8
9
An
nu
al G
row
th %
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-2
-1
0
1
2
3
4
5
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
Year
An
nu
al G
row
th %
World
OECD
Low Income
Source: Data from Worldbank (2008)
Stylized factsStylized facts
Urbanization/Population growth:
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Source: United Nations (2008b)
Stylized factsStylized facts
Relation Gini-Index and Income:
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Source: Data from Wolrdbank (2008) and Human Development Reports (2008)
TheoryTheory
Measuring Inequality: • Gini-coefficient• Most important measure for
income inequality• Based on the Lorenz curve
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Source: Answers.com (2008)
TheoryTheory
Kuznets theory: • developed 1955• early stages inequality
increases• then decreases again• structual transformation
(agricultural, industrial
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(agricultural, industrial sector)
• Smith and Todaro: whether shape is shown depends on type of structual change
• Empirical works suggest that it rather works for cross-country data
Source: after Smith and Todaro (2003)
EmpiricsEmpirics
Model (1):
• 59 % (R2) of GINI
explained
• FDI: positve relation
• GNI negative
• Coeffients not
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• Coeffients not
significantly different
from 0
EmpiricsEmpirics
Model (2):
• 60 % (R2) of GINI
explained
• GNI negative
• OECD makes a clear
difference
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difference
• Coefficients not
significantly different
from 0
ConclusionConclusion
• Statistics do not give clear evidence on GINI
explanation
• Theory of Kuznets asks for an inverted u-
curve• Estimated model does not allow for this �
results blurred
• Increase sample size and improve
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• Increase sample size and improve
variables that indicate development
stage
• Equation estimation leads to a
coefficient
significantly differing from 0
• still overall fit only 43%
• use exponential equations
SourcesSources
Simon Kuznets, 1955. Economic Growth and Income Inequality.
The American Economic Review, 45(1), 1-28.
Smith, S.C. & Todaro, M.P., 2003. Economic Development 8th ed., Boston:
Addison Wesley.
Human Development Report, 2008. Human Development Report 2008.
Available at: http://hdrstats.undp.org/indicators/ [Accessed July 13, 2008].
United Nations, 2008b. World Urbanization Prospects: The 2005 Revision.
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United Nations, 2008b. World Urbanization Prospects: The 2005 Revision.
Available at: http://www.un.org/esa/population/publications/WUP2005/
2005WUP_FS5.pdf [Accessed July 9, 2008].
Worldbank, 2008. DDP Quick Query. Available at: http://ddp-ext.worldbank.org/ext/
DDPQQ/member.do?method=getMembers&userid=1&queryId=135
[Accessed July 9, 2008]
Thank you for your attention!
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