Does income inequality move together across the world?

ABSTRACT

This study investigates the relative importance of synchronization of income inequality, measured by the Gini coefficient, using a dynamic factor model. This study finds that global factors are relatively stable, whereas regional factors have heterogeneous effects on income inequality fluctuations. Additionally, regional factors account more significantly for the future variance of income inequality than global factors, which is evidence of convergence within each continent.

KEYWORDS:

• Income inequality
• dynamic factor model
• globalization
• comovement

JEL CLASSIFICATION:

• D63
• F20

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ We compute the time series of variance of each factor as the fraction of the sum of variance of all components as in Del Negro and Otrok (2007).

² All macroeconomic variables are from Penn World Table (PWT) 10.0.

Additional information

Funding

This work is supported by the research grant of Kongju National University in 2022-0178-01.