On The Nature Of Income Inequality Across Nations
AbstractIn this paper, we investigate the nature of income inequality across nations by first estimating, testing, and distinguishing between two types of aggregate production functions: the extended neoclassical model and a mincerian formulation of schooling-returns to skills. Next, given our panel-data estimates, we proceed in decomposing the variance of the (log) level of output per-worker in 1985 into that of three distinct factors: productivity, human capital, and the dynamic incentives to accumulate capital. Finally, we classify a group of 95 countries according to their relative position (above or below average) for each of these factors. The picture that emerges from these last two exercises is one where countries grew in the past for different reasons, which should be considered for policy design. Although there is not a single-factor explanation for the difference in output per-worker across nations, it seems that productivity differences can explain a considerable portion of income inequality, followed second by dynamic inefficiencies and third by human capital accumulation.
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Bibliographic InfoPaper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 370.
Date of creation: 01 Mar 2000
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- Pedro Cavalcanti Ferreira & Samuel deAbreu Pessoa & Joao Victor Issler, 2000. "On the Nature of Income Inequality Across Nations," Econometric Society World Congress 2000 Contributed Papers 1487, Econometric Society.
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