On the Measurement of Functional Income Distribution

Department of Economic Policy Finance and Development University of Siena, 2007

The interest around the functional distribution has gained a new momentum since the late 1980s with new theoretical advances of Neo-Classical economics and with the contemporary large swing in favour of capital incomes that characterized most European countries. This paper revises the theoretical literature on the interplay between factor shares and economic growth, and it describes the competing evidence around the determinants of the large and enduring fall in the labour share experienced in Europe. The literature has produced a shared consensus on the determinants of the wage push in the 1970s and on the decline of the labour share in the 1980s, but there is still a unsettled debate on the reasons for the enduring decline over the 1990s. The paper also focuses on the possible impact of this significant change in the functional distribution of income on the interpersonal income inequality, evidencing the role in this respect of labour market and welfare institutions.

IMK Studies, 2009

Wage shares have fallen substantially over the past 25 years. In the Euro area the (adjusted) wage share declined by almost ten percentage points. Recently, there has been a renewed interest in the determinants of functional income distribution. IMF (2007a) and EC (2007) find that technological change has been the main cause of the decline in the wage share and that globalization has been a secondary cause. This study, firstly, tries to replicate these studies to investigate the robustness of their findings. Secondly, the estimated wage share equation is extended to allow for distributional effects of financial globalization and for different effects of union density according to social security system. We find that the estimations on which the conclusions of IMF and EC are based suffer from serious econometric problems and that their findings are not robust. In particular, the effect of technological change is often not statistically significant. Globalization (in production), however, has a robust effect. Results from the extended model suggest economically important (and mostly statistically significant) effects of financial globalization and of union density of non-Ghent countries. However, overall the results are sensitive to the specification and the estimation method. 2 Theoretical background. Different theories and key arguments in the recent debate .

International Review of Economics, 2017

società italiana di economia pubblica c/o dipartimento di scienze politiche e sociali-Università di Pavia Can the link between functional and personal income distribution enhance the analysis of inequality? Marisa Civardi

Economics and Finance. Université Panthéon-Sorbonne - Paris I, 2019. English., 2019

This thesis consists of four chapters on income distribution. All chapters are interrelated, and cohesively they serve the sole purpose of discussing the concept of income composition inequality. This concept is thoroughly explored from a conceptual, mathematical, as well as political economy perspective. Chapter 1 introduces this dissertation and its main findings. Chapter 2 presents the concept of income composition inequality, together with a summary statistics for its technical assessment. This chapter shows that income composition inequality links the functional and personal distribution of income. Chapter 3 analyzes the determinants of income inequality variation in light of the novel inequality dimension previously introduced. The methodology reveals a negative relationship between changes in income composition inequality and changes in income inequality. Chapter 4, co-written with Roberto Iacono, studies the evolution of income composition inequality in Italy between 1989 and 2016. By applying the method illustrated in Chapter 2, this Chapter shows that the strength of this link has steadily decreased in Italy over the period considered. Furthermore, it conceptualizes a simple rule of thumb for policy makers seeking to reduce income inequality in the long run. Chapter 5 proposes a method to jointly analyze the distributions of capital and labor and of saving and consumption across the population. Hinging on the novel concept of income composition inequality and on its technical assessment through the summary statistics proposed in Chapter 2, this Chapter classifies economic systems by bringing together these two distributions in a two-dimensional box. Economic systems can be classified as Kaldorian Systems or as Representative Agent Systems depending on their position in the box. The Chapter illustrates this method via an empirical application to the European context, in which two major clusters of economic systems - Mediterranean and Northern European - emerge. This Chapter shows how the classification proposed can be useful in understanding a country’s long-run performance in terms of capital accumulation, inequality and growth. Finally, Chapter 6 concludes this dissertation and lays the ground for future research on the matter.

This paper is by nature an exploration study aimed to examine the measures of income inequality and is integrated with an empirical investigation of possible factors affecting the level of inequality. Recent data shows that the gap between poor and rich has been widening on an international scale. The way to solve this " sharing of created economic value " problem begins with the problem of how to measure inequality. Our literature review revealed different ways of measurement and how the concept of inequality was approached as well as it determines possible candidates for factors in empirical analysis. By making reference to De Maio's findings (2007), most widely used methods of measurement are mentioned. A description of current situation in developed and developing economies based on most popular measure, which is Gini coefficient, is also provided. Our empirical setting, to define factors influencing Gini coefficient, is employing data for 32 developed and developing OECD and EU countries in 2011 and 2012. We estimated an OLS model to the relation between Gini coefficients and several pre-identified regressors. We have found a linear relation with average income tax rate (taxrate) and with labor force participation rate (laborrate). The fact that public policies in taxation and labor force participation should be altered to cope with inequality is stressed in the paper.