Income inequality and economic progress: an empirical test of the institutionalist approach

American Journal of Economics and Sociology, The,  Jan, 1996  by Kang H. Park

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13. Jain's compilation contains Gini index estimates across six different population units: households, economically active population, income recipients, workers, population and individuals. Its geographical coverage is broken down into three categories: national, rural, and urban. Gini coefficients calculated on the basis of nationalwide surveys on household incomes are used for correlation analysis.

14. Data for GNP per capita, population, and the separatism index are for 1975 while the dates of data collection for the Gini index vary from the early 1960s to the early 1970s. Even though the dates of data collection for the independent variables are different, no serious problem is expected with the estimation model because of the robust nature of income distribution. The income inequality index does not vary much over a relatively long time period.

15. The Human Development Index is a combined socio-economic indicator of development, ranging from 0 to 1, which incorporates educational attainment, life expectancy and real per capita GDP adjusted for differences in purchasing power among countries.

16. The intensity is coded on an ordinal scale of four categories that signify the political circumstances under which the separate group came to be part of the state to which it now belongs.

17. From the institutionalist point of view, a more appropriate variable to be used in explaining economic progress or growth would be the level of accumulated technology or scientific knowledge. However, such data are not readily available. Instead, gross domestic capital investment is used as a proxy variable.

18. United Nations Development Program reported the 1970 HDI for 110 countries in Human Development Report (1991, 97). However, matching observations with our data are obtained for only 58 countries.

19. There are two different classes of income inequality measures: positive measures based on factual data and normative measures incorporating social welfare function or value judgement on desirable state of income distribution. The present author analyzed the correlation among several positive income inequality measures including the Gini index, the Kuznets index, the Theil index and the top 20 percent income share with a sample of 62 countries and found their correlation coefficients ranging from .965 to .995 in "Reexamination of the Linkage between Income Inequality and Political Violence," Journal of Political and Military Sociology 14 (Fall 1986), 185-97. This finding indicates that the choice of positive income inequality measures would not affect the results found in this study. However, the possibility of using normative measures such as Dalton index or the Atkinson index, once available, should be investigated to see whether such measures represent the institutionalist concept of income distribution better than positive measures.

References

Allison, P. D. (1978). "On the Measurement of Inequality," American Sociological Review 43, 865-900.

Atkinson, A. B. (1970). "On the Measurement of Inequality," Journal of Economic Theory 2, 244-63.