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Rising Income Inequality and Competition: Evidence

Author

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  • Han , Minsoo

    (Korea Institute for International Economic Policy)

Abstract

Income inequality in many countries has risen recently. Using aggregate data of 22 countries, this paper provides a new evidence about the factor which might contribute to the rise in income inequality. The main finding is that the lack of competition, which is measured as the rise in markup, tends to be positively associated with the rise in inequality (higher inverted Pareto-Lorenz coefficient). The result is robust with other factors considered in the previous studies, e.g. openness to trade, capital account openness, technology, etc. I also find that facing the lack of competition, top 1% individuals gain and individuals between top 10 and 5% income shares among population lose the most. One possible interpretation is that the extra profit caused by the lack of competition would be obtained disproportionately in favor of top 1% individuals and therefore income inequality would increase.

Suggested Citation

  • Han , Minsoo, 2014. "Rising Income Inequality and Competition: Evidence," Working Papers 14-3, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepwp:2014_003
    DOI: 10.2139/ssrn.2634311
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    Cited by:

    1. Jasmine Mondolo, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," DEM Working Papers 2021/17, Department of Economics and Management.
    2. Mondolo, Jasmine, 2020. "Macro and microeconomic evidence on investment, factor shares, firm and labor dynamics in Italy and in Trentino," MPRA Paper 99138, University Library of Munich, Germany.
    3. Mondolo, Jasmine, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," MPRA Paper 110172, University Library of Munich, Germany, revised 05 Oct 2021.

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