Income Inequality Indices Interpreted as Measures of Relative Deprivation/Satisfaction

This paper considers different ways of making comparisons between individuals in terms of deprivation and/or satisfaction. This allows the Gini index, the Bonferroni index and the De Vergottini index to be interpreted as social deprivation measures as well as social satisfaction measures. The inequality measures that belong to the ?? family, or linear combinations of them, are obtained when using different weighting schemes to average the deprivation and satisfaction associated with each income level. Particularly, the generalised Gini indices (Yitzhaki, Int Econ Rev 24:617?C628 in 1983), the indices proposed by Aaberge (J Econ Inequal 5(3):305?C322, 2007) or those proposed by Imedio-Olmedo et al. (J Public Econ Theory 13(1):97?C124, 2011) can be used to evaluate social deprivation or social satisfaction in an income distribution.     

Ethnic Diversity and Inequality in Sub-Saharan Africa: Do Institutions Reduce the Noise?

Studies on the causes of income differences between the rich and the poor have received an extensive attention in the inequality empirics. While ethnic diversity has also been identified as one of the fundamental causes of income inequality, the role of institutions as a mediating factor in the ethnicity-inequality nexus has not received the scholarly attention it deserves. To this end, this study complements the existing literature by investigating the extent to which institutional framework corrects the noisy influence originating from the nexus between “ethnic diversity” and inequality in 26 sub-Saharan African countries for the period 1996–2015. The empirical evidence is based on pooled OLS, fixed effects and system GMM estimators. The main findings reveal that the mediating influences of institutional settings are defective, thus making it extremely difficult to modulate the noisy impacts of ethno-linguistic and religious heterogeneity on inequality. In addition, the negative influences orchestrated by ethno-linguistic and religious diversities on inequality fail to attenuate the impact of income disparity even when interacted with institutions. On the policy front, institutional reforms tailored toward economic, political and institutional governances should be targeted.

     

Correcting the Underestimation of Top Incomes: Combining Data from Income Tax Reports and the Brazilian 2010 Census

To deal with the problem of underestimation of top incomes in household surveys, we propose a methodology to combine the income distributions of the Brazilian 2010 Census (survey) and of 2010 DIRPF (personal income tax reports). The method consists in estimating a system of non-response weights that uses as frame the tax register and is applied to the top of the distribution. After applying this calibration methodology, we decompose inequality income sources. Correcting survey distributions with tax data increases the contribution of non-labor income to inequality, as the case of the Brazilian Census shows. Changes in the methodology do not affect the results substantially.     

Political legitimacy versus economic imperatives in system transformation: Hungary and East Germany 1990–93

East European policy makers currently face critical trade-offs between economic imperatives and system legitimacy imperatives. Economic imperatives, derived from the goal of medium term prosperity, demand rapid privatization and marketization. System legitimacy imperatives demand measures to minimize the unemployment, wage cuts and income inequality resulting in the short term from privatization and marketization. In 1989–90 East Germany and Hungary appeared to face the least harsh trade-offs and to be best placed of the ex-communist countries to achieve successful system transformation. Unlike their East European neighbours, neither had to develop democratic and market institutions from scratch. East Germany would import the Federal Republic's political system and market institutions. Hungary already had organized political parties and had been developing market institutions since 1968. Using panel survey data, the paper shows that, despite considerable economic achievements since 1990, there is widespread personal dissatisfaction and distress, and the legitimacy of democratic and market institutions is weak. The main data sources are the Hungarian Socio-Economic Panel (1992–5777 individuals in 2888 households) and the East German segment of the German Socio-Economic Panel (1990–4453 individuals in 2179 households).     

Relative Income and Happiness in Asia: Evidence from Nationwide Surveys in China, Japan, and Korea

This study attempts to examine relative income effects on perceived happiness in three major Asian countries—China, Japan, and Korea—in comparison with the United Sates, on the basis of largely comparable nationwide surveys in these countries. Consistent with the results from previous studies in Western countries, comparisons with an individual’s own income and average income of the reference group are significantly associated with the individual’s perceived happiness in Asia. The associations between relative income and happiness are stronger for individual income than family income in China, while the opposite is true in Japan and Korea. Even after controlling for the subjective assessment of family income or personal class identification within the society as a whole, income comparisons within the reference group matter for assessing happiness, especially when using family income for comparisons. Moreover, relative deprivation within the reference group, which is measured by the Yitzhaki index, is negatively related to happiness, providing more evidence for the validity of the relative income hypothesis.     

Analyzing the Effects of Negative and Non-negative Values on Income Inequality: Evidence from the Survey of Household Income and Wealth of the Bank of Italy (2012)

Generally, inequality indices play a basic role in the analysis of welfare economics, also appearing as technical tools applied to income data. A good deal of findings in this research field is provided by the Gini coefficient, typically used for non-negative income values. Even if negative income is often an unfamiliar concept, its presence in real surveys may lead to difficulty in applying the classical Gini-based inequality measures, as they lie outside their standard ranges. In this paper, the more general issue of negative values is considered and a reformulation of the main Gini-based inequality measures adjusted for the problem of negative values is adopted with the purpose of providing theoretical extensions for the income decomposition approach by both income sources and area components. Investigations about the related inferential issues, conducted thorough simulation studies based on resampling techniques, highlight how the traditional approach of removing negative income values may yield different results in terms of inequality estimation, proving that the proposed approach, based on preserving negative values, is the more appropriate practice to follow to avoid the loss of data that really provide a coherent picture of the inequality condition.     

Institutions and Poverty: A Critical Comment Based on Evolving Currents and Debates

Tebaldi and Mohan (Journal of Development Studies 46:1047–1066, 2010) have established an empirical relationship between institutions and monetary poverty. We first, reflect their findings in the light of recent development models, debates and currents in post-2010 literature. We then re-examine their results with a non-monetary and multidimensional poverty indicator first published in 2010. Our findings confirm the negative relationship and the nexus disappears with control for average income. Hence, confirming the conclusions of the underlying study that institutions could have an indirect effect on multidimensional poverty. In other words, the poverty eradication effect of institutions is through average income as opposed to income inequality. We discuss how the findings provide insights into: (1) the Chinese model versus sustainable development; (2) debates over preferences in economic rights; (3) China’s development and outlook; (4) the Fosu conjectures and (5) Piketty’s and Kuznets’ literatures.     

Individual Income Inequality and Its Drivers in Indonesia: A Theil Decomposition Reassessment

This article employs a Theil decomposition analysis to examine various dimensions of income inequality, using the 2007 Indonesian Family Life Survey. The empirical strategy is based on the individual-level income data—instead of group means as in the existing literature—and thus accounts for within-group dispersion of individual incomes. The decomposition exercise reveals that income inequality across education levels constitutes about 13 % of total income inequality. The urban–rural and interprovincial dimensions individually explain 6.0–6.5 %, but the contribution of income inequality by genders appears to be negligible. The findings highlight educational reform as an effective redistributive policy.     

Estimating Quality of Life and Place with Location Theory: The McBucks Index

This paper explores the changes in inequality and welfare between EU regions at the NUTS 3 level over the 2003–2011 period. Changes in absolute and relative inequalities are broken down into components explaining the effects of population change, re-ranking of regions and income growth between regional per capita incomes. Each component of inequality change is further decomposed by subgroup, revealing the contributions arising from changes within subgroups and from changes between subgroups. The decomposition of the change in absolute inequality is used to develop a decomposition of the change in welfare between EU regions.     

农民工汇款与家庭收入不平等:基于反事实收入的分析

本文利用来自于农村劳动力输出大省湖北省的调研数据来考察农民工汇款对输出地家庭收入不平等的影响。研究结果表明,当我们简单将农民工汇款看成外生的转移收入时,农民工汇款能改善农村家庭的收入不平等状况。不过,当考虑到农村劳动力外出务工的选择性,并通过引入工具变量来构建那些外出劳动力户的反事实收入时,我们会得到相反的结论:由于那些外出务工劳动力往往来自于经济状况较好的家庭,农民工汇款扩大了农村家庭的收入不平等状况,家庭人均收入的基尼系数从反事实收入情形下的0.3551上升至实际收入情形下的0.3774。     

Economic Stress and the Great Recession in Ireland: Polarization,Individualization or ‘Middle Class Squeeze’?

Following an unprecedented boom, since 2008 Ireland has experienced a severe economic and labour market crisis. Considerable debate persists as to where the heaviest burden of the recession has fallen. Conventional measures of relative income poverty and inequality have a limited capacity to capture the impact of the recession in terms of social exclusion. This is exacerbated by a dramatic increase in the scale of debt problems including significant negative equity issues. Our analysis provides no evidence for individualization or class polarization of risk. Instead, while economic stress level is highly stratified in class terms in both boom and bust periods, the changing impact of class is highly contingent on life course stage. An income based classification showed that the affluent income class saw its advantage relative to the income poor class decline at the earliest stage of the life-course and remain stable across the rest of the life course. At the other end of the hierarchy, the income poor class experienced a relative improvement in their situation in the earlier life-course phase and no significant change at the later stages. For the remaining income classes, life-course stage was even more important. At the earliest stage the precarious class experienced some improvement in its situation while the outcomes for the middle classes remain unchanged. In the mid-life course the precarious and lower middle classes experienced disproportionate increases in their stress levels while at the later stage it is the combined middle classes that lost out. Additional effects over time relating to social class are restricted to the deteriorating situation of the petit bourgeoisie at the middle stage of the life-course. The pattern is clearly a good deal more complex than that suggested by conventional notions of ‘middle class squeeze’ and points to the distinctive challenges relating to welfare and taxation policy faced by governments in the Great Recession.     

Welfare State Development,Individual Deprivations and Income Inequality: A Cross-Country Analysis in Latin America and the Caribbean

Several scholars have confirmed the role that the welfare state (WS) plays in reducing poverty, promoting equality and ensuring the common wellbeing. One of the limitations of the scholarship has been the conceptualization and operationalization of the WS and poverty as one-dimensional variables. The purpose of this paper is to examine the relationship between welfare state development, single-dimensions deprivations and income inequality in Latin America and the Caribbean, before and after controlling for demographic and cyclical factors. The WS is operationalized as a one-dimensional variable, but also taking into account its multidimensional nature. Three individual deprivations suffered by people on poverty and two income inequality indicators are used as dependent variables. Three pooled time-series cross-section regression analyses with panel-corrected standard errors models were carried out on 18 countries in the region around 2000, 2005 and 2010. This paper shows that the development of social-welfare programs and institutions seems to be an effective way of tackling individual deprivations suffered by people on poverty in the region. On the other hand, the WS development didn’t appear to be effective to reduce income inequality. The outcomes of welfare institutions appear to be the pivotal dimension to reduce income inequality and income deprivations in the region.     

Envy and Pride: How Economic Inequality Deepens Happiness Inequality in South Korea

This paper examines how economic inequality at the local level affects individuals’ subjective well-being (SWB) through social comparison in Seoul, South Korea. We implement a multi-level analysis combining asset inequality, calculated using the actual transaction prices of apartments, and public opinion surveys conducted by Seoul Metropolitan City between 2008 and 2016. Our analysis shows that inequality negatively affects SWB among respondents whose family income is lower than the median (the envy effect), but drives up SWB among the other half (the pride effect). Further analysis on the effect of inequality on subjective class awareness corroborates a social comparison mechanism: the haves embrace an upper-class awareness as local inequality increases, while the have-nots embrace a lower class awareness. These findings suggest that, despite concerns about economic inequality and its negative consequences, calling for policy reform to reduce inequality may be unpersuasive to the better off members of society, especially if doing so increases individual financial burdens.

     

Who are Your Joneses? Socio-Specific Income Inequality and Trust

Trust is a good approach to explain the functioning of markets, institutions or society as a whole. It is a key element in almost every commercial transaction over time and might be one of the main explanations of economic success and development. Trust diminishes the more we perceive others to have economically different living realities. In most of the relevant contributions, scholars have taken a macro perspective on the inequality-trust linkage, with an aggregation of both trust and inequality on a country level. However, patterns of within-country inequality and possibly influential determinants, such as perception and socioeconomic reference, remained undetected. This paper offers the opportunity to look at the interplay between inequality and trust at a more refined level. A measure of (generalized) trust emerges from ESS 5 survey which asks “...generally speaking, would you say that most people can be trusted, or that you can’t be too careful in dealing with people?”. With the use of 2009 EU-SILC data, measurements of income inequality are developed for age-specific groups of society in 22 countries. A sizable variation in inequality measures can be noticed. Even in low inequality countries, like Sweden, income imbalances within certain age groups have the potential to undermine social trust.     

Measuring inequality with asset indicators

This paper examines whether, in the absence of information on household income or consumption, data on household infrastructure, building materials, and ownership of certain durable assets can be used to measure inequality in living standards. Principal components analysis is used to obtain a relative measure of inequality, and a bootstrap prediction method is provided for use when auxiliary surveys are available. Mexican data is used to show that the inequality methods provided do provide reasonable proxies for inequalities in living standards. An application finds that after controlling for household income and demographics, school attendance of boys in Mexico is negatively related to state-level inequality.     

Demographic change,rising earnings inequality,and the distribution of personal well-being, 1959–1989

This paper uses new methods to determine the sources of the sharp fall and then the steep rise in personal income inequality between 1959 and 1989. The increase in the proportion of single-head families tended to boost inequality over the entire period. Forty percent of the reduction in income inequality in the 1960s occurred because of the decline in earnings inequality among male heads of families; more than one-third of the increase in inequality after 1969 occurred because inequality in male earnings soared. Since 1979 females’ gains in earnings have increased inequality because these gains have been concentrated increasingly in families with high incomes     

Socioeconomic Status,Income Inequality,and Health Complaints: A Basic Psychological Needs Perspective

Socioeconomic status (SES) and income inequality are now recognized as important determinants of health, and there is growing interest in uncovering the intermediary psychosocial pathways through which the socioeconomic context affects physical well-being (Marmot in The status syndrome: how social standing affects our health and longevity, Henry Holt, New York, 2004; Wilkinson and Pickett in The Spirit Level: why more equal societies almost always do better, Allen Lane, London, 2009). We adopted the applied framework of self-determination theory (SDT; Deci and Ryan in Psychol Inq 11:227–268, 2000) and hypothesized that fulfillment of the basic psychological needs for autonomy, competence, and relatedness would mediate the relationships that SES and income inequality have to self-rated health. An online community sample of American participants (N = 1,139) completed a detailed demographic survey and provided self-reports of need fulfillment and health complaints. Structural equation models controlled for impression management and self-deceptive enhancement. Controlling for sex and age, need fulfillment was predicted positively by subjective SES and objective household income and negatively by state-level income inequality; in turn, need fulfillment predicted lower levels of health complaints. These findings suggest that SDT provides a useful framework for the study of SES, income inequality, and health, and that basic psychological needs are an important mechanism through which socioeconomic contexts influence health.     

The Association Between Perceived Income Inequality and Subjective Well-being: Evidence from a Social Survey in Japan

Previous studies have shown that income inequality in society is negatively associated with individuals subjective well-being (SWB), such as their perceived happiness and self-rated health (SRH). However, it is not realistic to assume that individuals have precise information about actual income distribution measured by the Gini coefficient or other statistical measures. In the current study, we examined how perceived income inequality, rather than actual inequality, was associated with SWB, using cross-sectional data collected from a nationwide, Internet survey conducted in Japan (N = 10,432). We also examined how this association was confounded by individuals’ objective and subjective income status, considering the possibility that individuals with lower income status are more inclined to both perceive income inequality and feel unhappy/unhealthy. In our analysis, we focused on the perception of widening income inequality (as perceived income inequality), perceived happiness and SRH (as SWB), and household income and living standards compared with 1 year ago and compared with others (as income status). We also controlled for personality traits. We obtained three key findings: (1) perceived income inequality was negatively associated with SWB; (2) both perceived income inequality and SWB were associated with income status; and (3) the association between perceived income inequality and SWB was attenuated after controlling for income status, but not fully for perceived happiness. These findings suggest that perceived income inequality, which links actual income inequality to SWB, should be further studied.     

The McMansionization of America? Income stratification and the standard of living in housing, 1960–2000

Consumption patterns and living standards are relatively neglected in stratification research even though they are important indicators of material well-being. Consumption inequality is related to income and wealth disparities through complex processes not yet well understood. This paper addresses this gap by analyzing a striking shift in the standard of living in housing in the US that occurred at the same time as a substantial increase in income inequality. Houses became significantly bigger in the 1980s and 1990s just as inequalities deepened, reversing an earlier trend towards smaller houses. Diverse theoretical traditions in the consumption and housing stratification literatures explain this shift differently, and in particular posit very different effects of rising income inequality. I derive several alternative expectations from these traditions: two predicting that the increasing size of houses was broadly shared across income levels, while another expects it represented increasing divergence in living standards, paralleling the trend in income inequality. I use US Census and American Housing Survey data and several different methods to adjudicate between these theories. The results provide some support for each of the alternative expectations, but the most significant finding is that big house ownership became more concentrated among the affluent. A focus on living standards thus uncovers a key source of rising disparities at the turn of the 21st century with important implications for wealth stratification too since houses are the major debt and asset held by most Americans.     

Income Inequality and its Consequences for Life Satisfaction: What Role do Social Cognitions Play?

While it is generally agreed that income inequality affects an individual’s well-being, researchers disagree on whether people living in areas of high income disparity report more or less happiness than those in more equal environments, thereby indicating the need to study how and why income inequality matters to the individual’s well-being. Findings on group-specific reaction patterns to income inequality further fuel this need. Alesina et al. (2004) argue that a preference for inequality and the perception of the possibility of social mobility account for the indistinct relationship between income inequality and subjective well-being. Combining this hypothesis with previous research on social cognition and drawing on social justice theory, this paper aims to demonstrate the mediating nature of perceptions of income inequality. It argues that the perceived legitimacy of distributive outcomes and procedures contributes to how income inequalities affect individuals and their sense of well-being. The empirical analysis is based on data from the International Social Justice Project, developed from face-to-face interviews with a representative sample of the German population. Using structural equation modeling, the paper finds structural biases in the perception of income inequality. The paper concludes that subjective well-being is a product of the individual’s perception and legitimating processes. The results indicate that social cognition is a useful tool for studies of income inequality and subjective well-being.