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The Effect of Geopolitical Risk on Income Inequality: Evidence from a Panel Analysis

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  • Osama D. Sweidan

    (United Arab Emirates University)

Abstract

The current paper empirically explores the geopolitical risk influence on income inequality. It assumes that geopolitical risk’s effects change over time. That is because the geopolitical events’ reoccurrence and the interaction with unobserved variables impose permanent adjustments in the decision process. Therefore, we employ the two-way fixed Prais-Winsten regression with panel-corrected standard errors to estimate this relationship on a yearly basis. Our paper extracts evidence from 18 countries during the period (2007–2020). It finds that the effect of geopolitical risk on income inequality is positive or geopolitical risk impairs income inequality. Moreover, geopolitical risk and its interaction with the unobserved variables can mitigate or expand income inequality, though it will not abolish it. Our results’ robustness check using the Palma ratio as the dependent variable instead of the Gini coefficient produces similar results. Our paper presents a group of policy implications extracted from our results.

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  • Osama D. Sweidan, 2023. "The Effect of Geopolitical Risk on Income Inequality: Evidence from a Panel Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 167(1), pages 47-66, June.
    • Handle: RePEc:spr:soinre:v:167:y:2023:i:1:d:10.1007_s11205-023-03093-x
    DOI: 10.1007/s11205-023-03093-x
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    1. Osama D. Sweidan, 2023. "Geopolitical Risk and Income Inequality: Evidence from the US Economy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(1), pages 575-597, September.

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    More about this item

    Keywords

    Geopolitical risk; Income inequality; The Gini index; The Palma ratio; Panel analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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