Advances in Economics and Business Vol. 5(10), pp. 539 - 549
DOI: 10.13189/aeb.2017.051002
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Income Inequality in Latin America and Eastern EU through the Great Recession: An Ordered Probit Analysis


Peter Mikek *, Adam Carter
Department of Economics, Wabash College, USA

ABSTRACT

Income distribution directly affects economic growth and the spending patterns in an economy. This paper employs an ordered probit panel to measure the effect of the Great Recession on income inequality in Latin American and Eastern EU members. The results suggest the crisis increased inequality in studied countries overall. However, those countries with low levels of inequality saw their Gini coefficients decrease further, while the crisis increased inequality in countries with already high inequality. Additionally, the results show that European Union membership on average contributed to lower likelihood of high Gini coefficients. Furthermore, marginal effects lend additional evidence of lower income gap for the Eastern EU members as they generally show negative marginal effects for countries with initially high inequality and positive for those with low Gini coefficients. Finally, we find no evidence that FDI and capital incentives have any direct impact on inequality, while GDP growth, poverty, and export incentives are associated with higher and tax revenues and export growth with lower income inequality.

KEYWORDS
Income Inequality, Financial Crisis, Poverty, Great Recession

Cite this paper
Peter Mikek , Adam Carter . "Income Inequality in Latin America and Eastern EU through the Great Recession: An Ordered Probit Analysis." Advances in Economics and Business 5.10 (2017) 539 - 549. doi: 10.13189/aeb.2017.051002.