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관리자 |
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2024-06-16 |
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[JID 2024] Decoupling of Functional and Household Income Distribution by Economi
c Growth: Three-way Growth-Equity Nexus |
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Juneyoung Lee and Keun Lee (2024), "Decoupling of Functional and Household Income Distribution by Economic Growth: New Findings from analysing the Three-way Growth-Equity Nexus," Journal of International Development, DOI: 10.1002/jid.3903
Abstract
This study analyzes the three-way relationship of economic growth and the two aspects of income distribution, namely, functional income distribution (labor income share) and household income distribution (Gini coefficient). One contribution of such three-way analysis is to reveal the ‘decoupling’ pattern of the growth-equity nexus, namely decoupling between functional income distribution and household income distribution, as it finds that economic growth tends to increase labor income share but worsen household income inequality, and also to confirm the reverse relationship that that higher labor income shares and household income inequality lead to a higher rate of economic growth. We show that these findings co-exist with the traditional belief in the literature about the directly reinforcing relationship between functional and household income distribution. These findings are consistent with skilled labor compensated by performance-based higher wages, which is often associated with a skill-biased technological change. The study confirms the same three-way relationship in both developed and developing countries but with several different determinants and the different trends of the key variables. Given this nuanced trade-off between economic growth and household income equality, coupled with no such trade-off between growth and labor income share, a sensible policy prescription may be a combination of growth-enhancing policy of increasing pre-tax labor income share and separate redistribution policy to decrease disposable household income inequality, which can mitigate income inequality without harming economic growth.
Keywords: Income distribution, economic growth, simultaneous equations system, Gini coefficient, labor income share, performance-based wages
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