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Explaining International and Intertemporal Variations in Income Inequality

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  • Li, Hongyi
  • Squire, Lyn
  • Zou, Heng-fu

Abstract

This paper explores the propositions that income inequality is relatively stable within countries and that it varies significantly among countries. A new and expanded data set provides broad support for both propositions. Drawing on political economy and capital market imperfection arguments to explain the intertemporal and international variation in inequality, the empirical analysis shows that the predicted variables associated with the first argument (a measure of civil liberties and the initial level of secondary schooling) and the second argument (a measure of financial depth and the initial distribution of land) are indeed important determinants of inequality.

Suggested Citation

  • Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
  • Handle: RePEc:ecj:econjl:v:108:y:1998:i:446:p:26-43
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    1. Abhijit V. Banerjee & Andrew F. Newman, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 211-235.
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    4. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    5. Datt, Gaurav, 1998. "Computational tools for poverty measurement and analysis," FCND discussion papers 50, International Food Policy Research Institute (IFPRI).
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