Nonlinearities and the Determinants of Inequality: New Panel Evidence

Antonio Francesco Gravina
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Antonio Francesco Gravina: University of Messina

No 2020.22, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Relying on data for a panel of 90 economies over 1970-2015 and System-GMM estimates, we extend the standard Kuznets-curve empirical framework to investigate how financial development, globalisation and technology affect income inequality. Our findings reveal the presence of significant nonlinearities, consistent with either U-shaped or inverted U-shaped relationships. As such, depending on whether a certain threshold value is achieved, the same determinants of income distribution can exert opposite effects in different countries. Globalisation is associated to increasing inequality in most advanced economies, but to falling disparities for the large majority of emerging economies. Further, while the effects for advanced economies are mixed, technology and financial development lead to increasing inequality for most emerging economies. Hence, particularly in countries in earlier stages of development, policymakers aiming at fostering growth via technological progress or financial development should also consider the nature of the trade-offs with inequality and how policy can improve them.

Keywords: Inequality; Globalisation; Technology; Finance; Nonlinearity; Panel data (search for similar items in EconPapers)
JEL-codes: C01 C33 F63 O11 O15 O33 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2020.22

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