IMF Working Papers

National Income and Its Distribution

Author/Editor:

Markus Bruckner ; Era Dabla-Norris ; Mark Gradstein

Publication Date:

June 11, 2014

Electronic Access:

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Summary:

Does the distribution of income within a country become more equal as it grows richer? This paper uses plausibly exogenous variations in trade-weighted world income and international oil price shocks as instruments for within-country variations in countries real GDP per capita to examine this issue for a large sample of advanced and developing countries. Our findings indicate that increases in national income have a significant moderating effect on income inequality: a one percent increase in real GDP per capita, on average, reduces the Gini coefficient by around 0.08 percentage points, a result that is robust across income levels, different time horizons, and alternative estimation techniques. From a policy perspective, our results suggest that education policies that promote equity and help individuals continue on to higher levels of education could help reduce income inequality.

Series:

Working Paper No. 2014/101

Subject:

Income distribution Income inequality National accounts National income Oil prices Personal income Prices