INCOME INEQUALITY.
Pratik Mahajan
Div– A, Roll No: 33 MMS
The Role of Government Policies in Worsening Income Inequality in Brazil”
The study looks at how the Brazilian government affects income inequality. Instead of reducing inequality, the government’s policies often make it worse. One of the main reasons is the high salaries and pensions given to public sector workers. Government employees earn much more than private sector workers with similar skills. Their pensions are also much larger, and there are fewer restrictions on them. This creates a system where a small, privileged group benefits the most. Taxes and social programs do help reduce inequality, but their impact is too small to balance out the advantages given to public workers. While social assistance programs like Bolsa Família help the poor, they are not large enough to make a big difference. The study concludes that the Brazilian government’s policies favour public sector employees and formal workers while leaving informal workers and the poor with little support. Unless major reforms are made, income inequality in Brazil will continue to be a big problem. (Medeiros, Marcelo & Souza, Pedro H.G.F., 2013)
The Impact of Economic Cycles on Income Inequality in Germany”
This study looks at how income inequality in Germany changes during economic ups and downs. It finds that during economic booms (good times), income inequality increases because high earners make even more money. But during recessions (bad times), inequality decreases because high earners lose more income than lower earners. Government policies, like unemployment benefits and tax adjustments, help balance this effect by supporting low-income workers during crises. However, it is unclear whether society should accept the rising inequality that happens when the economy improves.( Geraldine Dany-Knedlik & Alexander Kriwoluzky, 2021)
The Impact of Government Transfers on Income Inequality and Unemployment: A Gender-Based Analysis”
The paper explores the dynamic relationship between income inequality, unemployment rates (male and female), and government transfers in the United States using a structural vector autoregression (SVAR) model with time series data from 1962 to 2019. It finds that increased government transfers lead to higher unemployment for both genders but reduce income inequality among women. The study also reveals that female unemployment reduces overall income inequality, potentially due to associative marriage effects, while male unemployment has a greater impact on government transfer growth. The findings suggest that gender-specific government transfers could improve social outcomes and reduce long-term government expenditures. give title tothis summary.( Haydory Akbar Ahmed & Hedieh Shadmani, 2024)
Technological Change, Economic Growth, and Income Inequality in Africa”
This study explores the relationship between technological change, economic growth, and income inequality, particularly in African countries from 1992 to 2019. The findings show that technological advancements drive economic growth but also increase inequality by favoring skilled workers while leaving unskilled workers unemployed. The research confirms that inequality can both hinder and reduce economic growth, highlighting the importance of education and human capital investment in reducing income disparities. The study supports the idea that while technological progress enhances productivity, it can widen income gaps if not balanced by policies promoting equal access to education and job opportunities.( Nasfi Fkili Wahiba & Mahmoudi Dina, 2023)
The Impact of Income Inequality on Risk-Taking Behavior
This study examines how income inequality influences individual risk-taking decisions. Through a real-effort field experiment, researchers introduced wage disparities and analyzed how participants invested their earnings in risky assets. The findings suggest that individuals with higher wages take more risks, but only when they are aware of income inequality. In contrast, lower-wage individuals do not significantly change their risk behavior to bridge the income gap. The study highlights the role of social comparison in financial decision-making and suggests that income inequality can encourage risk-taking among the wealthy, potentially influencing economic growth.( Schmidt et al 2015.)
The Impact of Local Income Inequality on Public Goods and Taxation in French Municipalities
This study examines how income inequality affects public spending and taxation in French municipalities. Using a detailed panel dataset, the research finds that greater income inequality leads to increased municipal infrastructure investment but has no clear impact on general publicspending. The study highlights that this effect is driven by changes in both the lowest and highest income groups—when the poor become poorer or the rich become richer, municipalities tend to increase local taxation to fund infrastructure projects. This suggests that local government policies respond more to extreme income disparities than to the middle-income population, shaping the distribution of public goods through taxation.( Brice Fabre, 2018.)
The Effect of Income Inequality on Price Dispersion
This study explores how income inequality affects price differences in consumer markets. Using a model that accounts for both consumer behavior and firm pricing strategies, the research shows that the middle class plays a crucial role in keeping prices competitive. Low-income consumers often cannot afford the time or money to search for the lowest prices, while wealthy consumers may not find it worthwhile. As a result, middle-class consumers are the most active in price comparison, leading to lower prices in markets with a strong middle class. The study concludes that income segregation can lead to higher prices for the poor due to reduced competition, emphasizing the importance of policies that improve access to market information and reduce search costs.( Somekh, Babak, 19 feb 2012)
Economic Growth, Well-Being, and the Role of Trust and Inequality
This study investigates whether economic growth improves people’s well-being in the long run. Using data from multiple countries, it finds that economic growth alone does not consistently increase well-being. However, when economic growth is accompanied by decreasing income inequality and stable or increasing social trust, it has a positive effect on well-being. The research highlights the importance of social factors in shaping economic outcomes and suggests that policies should focus not just on economic expansion but also on reducing inequality and fostering trust to enhance overall well-being.( Mikucka et al 2014)
Timing, Work Fragmentation, and Income Inequality: Insights from Germany
This study examines how the timing and fragmentation of work influence income inequality in Germany. Using data from the German Time Budget Survey 2001/2002, the research analyse how different work schedules—such as core vs. non-core hours and continuous vs. fragmented work periods—impact earnings. The findings show that individuals working fragmented or non-traditional hours tend to have different income distributions compared to those with standard work schedules. The study highlights that both market and non-market factors, such as education, household responsibilities, and regional characteristics, play a role in shaping earnings. It suggests that income inequality is not only determined by job type but also by when and how work is structured throughout the day.( Joachim Merz et al 2005.)
Reassessing the Link Between Corruption and Income Inequality
The study investigates the relationship between corruption and income inequality worldwide using an extreme bounds analysis (EBA) on data from up to 150 countries, primarily dating back to 1980. Contrary to some prior studies, the research finds no consistent evidence that corruption directly increases inequality; in some cases, it may even reduce it. Additionally, the study challenges the hypothesis of an inverted U-shaped effect of corruption on income distribution. Instead, more robust determinants of inequality include financial development, old-age dependency ratios, unemployment, capital stock, and population growth. The findings suggest that policymakers aiming to reduce inequality may achieve better results by addressing these economic factors rather than solely focusing on anti-corruption measures. (Jochen Hartwig & Jan‐Egbert Sturm, 2025).
Understanding Income Inequality: Causes and Effects Around the World
Income inequality is a major issue in many countries, and different studies show how various factors contribute to it. In Brazil, government policies often make inequality worse instead of reducing it. High salaries and pensions for public sector workers create a privileged group, while social programs like Bolsa Família are not strong enough to help the poor. In Germany, income inequality changes with the economy. During good times, the rich earn more, increasing inequality, while during recessions, the gap shrinks because high earners lose more income. Government policies like unemployment benefits help balance this effect.
In the United States, government financial support affects men and women differently. It increases unemployment for both genders but reduces income inequality for women. Female unemployment also lowers overall inequality, possibly due to marriage-related income effects. In Africa, technological progress boosts economic growth but increases inequality by favouring skilled workers. This highlights the need for better education and job opportunities to balance economic benefits.
Other studies explore different impacts of inequality. In France, local governments increase taxes and invest in infrastructure when inequality rises, but this mainly responds to the richest and poorest groups. In consumer markets, price differences grow when there is a weak middle class because low-income buyers cannot compare prices, and the wealthy do not care about small savings. Income inequality also influences risk-taking behaviour, as wealthier people take more financial risks when they see income gaps.
Economic growth does not always improve well-being unless it is paired with low inequality and strong social trust. In Germany, the way work is scheduled also affects income levels, with fragmented or non-traditional work hours leading to different earnings. Finally, while corruption is often linked to inequality, a global study found no clear connection. Instead, factors like financial development, unemployment, and population growth play a bigger role in shaping income distribution.
Overall, these studies show that income inequality is a complex issue influenced by government policies, economic cycles, job opportunities, and even personal behaviour. Addressing it requires targeted reforms in taxation, education, employment, and financial systems to create a fairer society.
Reference:
Brice Fabre, 2018. “The Impact of Local Income Inequality on Public Goods and Taxation: Evidence from French Municipalities,” PSE Working Papers halshs-01721825, HAL.
Geraldine Dany-Knedlik & Alexander Kriwoluzky, 2021. “Income Inequality in Germany Temporarily Sinks During Crises,” DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 11(46), pages 349-355.
Haydory Akbar Ahmed & Hedieh Shadmani, 2024. “Income inequality, unemployment, and government transfer: what do their dynamics tell us,” Journal of Economics and Development, Emerald Group Publishing Limited, vol. 26(4), pages 274-289, September.
Joachim Merz & Paul Böhm & Derik Burgert, 2005. “Timing, Fragmentation of Work and Income Inequality – An Earnings Treatment Effects Approach,” FFB-Discussionpaper 48, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
Jochen Hartwig & Jan‐Egbert Sturm, 2025. “Revisiting the impact of corruption on income inequality worldwide,” Kyklos, Wiley Blackwell, vol. 78(1), pages 206-242, February.
Medeiros, Marcelo & Souza, Pedro H.G.F., 2013. “The State and income inequality in Brazil,” Institute for Research on Labor and Employment, Working Paper Series qt584222f0, Institute of Industrial Relations, UC Berkeley. .
Mikucka, Malgorzata & Sarracino, Francesco, 2014. “Making economic growth and well-being compatible: the role of trust and income inequality,” MPRA Paper 59695, University Library of Munich, Germany.
Nasfi Fkili Wahiba & Mahmoudi Dina, 2023. “Technological Change, Growth and Income Inequality,” International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 121-131, January.
Schmidt, Ulrich & Neyse, Levent & Aleknonyte, Milda, 2015. “Income inequality and risk taking,” Kiel Working Papers 2000, Kiel Institute for the World Economy (IfWKiel).
Somekh, Babak, “undated”. “The Effect Of Income Inequality On Price Dispersion,” Working Papers WP2012/2, University of Haifa, Department of Economics.