Effects of Country and Geopolitical Risks on Income Inequality: Evidence from Emerging Economies

ABSTRACT

Income inequality is rising due to the risks and uncertainties related to the COVID-19 pandemic and other risks. This paper examines the effects of country risks (measured by economic/financial and political risks) and geopolitical risks on the income inequality in the panel dataset of 19 emerging market economies from 1985 to 2020. It is observed that all risk measures are positively related to income inequality. This evidence is also valid when different empirical models and estimation procedures are considered. The results are also robust for including various controls, excluding the extreme observations in the dataset, and considering the countries at the different income levels and regions.

KEYWORDS:

• Country risks
• financial risks
• geopolitical risks
• political risks
• income inequality
• emerging markets

Acknowledgments

We thank the editors and three reviewers for their comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the Major Humanities and Social Sciences Research Projects in Zhejiang Province [2021QN050]; Zhejiang Soft Science Research Program [2022C25015]; Fundamental Research Funds for the Provincial Universities of Zhejiang [GB201902002,GB202002003]; Bahcesehir University Scientific Research Project [BAP.2018-03.06]; Key Research Base of Philosophy and Social Sciences in Zhejiang Province [20JDZD028]; Center for Research in Regional Economic Opening and Development in Zhejiang University [REOD20210211]; Czech Research Center in Zhejiang Financial College.