EVALUATION OF THE FACTORS AFFECTING INCOME DISTRIBUTION IN OECD COUNTRIES WITH PANEL DATA ANALYSIS

Authors : Abdullah Özdemir, Gülsüm Adam

Pages : 137-161

View : 33 | Download : 56

Publication Date : 2024-12-31

Article Type : Research Paper

Abstract :The world economy received new impulses thanks to the acceleration of international trade and cooperation in the last decades and this process subsequently contributed to the growing research interest concerning the relative equality of the distribution of per capita income in various countries. Feeding into this, the issue of how rich-poor income inequality across the population shifts towards or away absolute zero has gained importance in relation to long term economic growth and equity. Thus, it is important to explore in-depth how or what the changes occurring in relation to the key aspects of income distribution would have on difference in income severity between the two groups in focus. The income inequality determinants in this paper are firstly investigated and then econometrically tested using 2001-2020 panel data for 25 OECD member countries. Due to cross-sectional dependence and cross-sectional heterogeneity present in the data, data is treated in the form of panel data. The series’ stationarity is tested using the Pesaran’s (2007) CIPS Panel Unit Root Test, which is classified amongst the second generation unit root tests. The relationship between the variables is also tested for a long run relationship in which case the Westerlund Panel Cointegration Test and the Estimation of Cointegration Coefficients Using the Panel AMG (Augmented Mean Group) method by Eberhardt and Bond are employed. The Dumitrescu Hurlin Panel Causality Test was used to assess the relationships, between the variables. The result of the study shows that a one percent increase in the consumer price index increases income inequality by 0.01%. Further, one unit increase in indirect tax, human development index political stability, and absence of violence/terrorism index decrease income inequality by 0.08%, 19.3%, and 0.04%, respectively. Hence, the result says that the concerned variables need to be considered while formulating policies for increasing income equality.
Keywords : Gelir Eşitsizliği, Gini Endeksi, Panel Veri Analizi