income distribution inequality in pakistan, thailand and australia _using gini index, gdp and...
TRANSCRIPT
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
1/14
56
LOREN
Inecono
function
ofthedi
income
thetotal
percenta
showdis
consider
develop
inequalit
GINIINThisinde
distribut
calculate
familyin
arrange
country'
45degre
curveto
KUZNE
AKuzne
Kuznets'
overtim
certaina
decreas
earlysta
capitalis
inequalitmost.
Whereas
incurred
growth,
financef
CURVEmics,theLo
oftheempi
tributiona
istribution,
incomethe
geofincom
tributionof
ittobeam
dbyMaxO
yofthewe
EXxmeasures
ionoffamil
dfromthe
comeisplo
fromthep
Lorenzcur
eline.The
the45degr
SCURVEscurveisth
hypothesi
whileaco
verageinco
.Onetheor
gesofdevel
themainm
y
encourag
inmature
butnotyet
ndinequali
ortheiredu
renzcurvei
ricalprobab
sumedbyt
whereit
sh
yhave.The
eontheya
assets.Ins
easureofs
.Lorenzin
lthdistribu
thedegree
incomein
orenzcurv
tedagainst
ooresttoth
eandthe
orenearly
eelineand
egraphical
thatecono
untryisdev
meisattain
y
astowhy
opment,wh
echanismo
s
growth
b
conomiesh
paid,takes
tyslowsgro
cationinim
sagraphica
ilitydistrib
ebottomy
wsfor
the
percentage
xis.Itcanal
chuse,ma
cialinequal
905forrep
tion.
ofinequalit
country.T
,inwhichc
thenumbe
erichest.Th
5degreeh
equalacou
helowerit
representat
micinequal
loping,and
d,inequali
hishappen
eninvestm
economic
allocating
umancapit
theplaceof
wthbylow
perfectcre
lrepresent
tionofwea
%oftheval
bottomx%
ofhouseho
sobeused
yeconomi
ity.Itwas
resenting
inthe
eindexis
umulative
offamilies
eindexist
lpinglinet
ntry'sinco
Giniindex.
ionofSimo
ityincrease
thenafter
ybeginsto
statesthat
ntinphysi
rowth,
esources
to
alaccrual,o
physicalca
ringeduca
itmarkets.
tionofthe
lth;itisagr
ues.Itisoft
fhousehol
ldsisplotte
o
ts
eratioof(
(b)theent
edistributi
in
al
wards
thos
ranestima
italaccrual
ionstandar
D
Ineq
ac
umulative
aphshowin
enusedto
ds,what
pe
onthexa
)theareab
iretriangula
n,theclos
who
save
eofcostth
asthemain
dsbecause
iagramrepre
Giniindexo
Lorenzcur
uality=Gini
I
Danis
counting3
+9231
1|P
istribution
thepropo
epresent
centagey%
is,the
etweena
rareaunde
ritsLorenz
nd
invest
t
thasbeen
sourceof
poorpeopl
senting
nthe
e*
ndex**
hSultan54@gmail
511005
a g e
tion
of
rthe
e
lack
.com
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
2/14
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
3/14
3|P a g e
56
GDP - realgrowthrate
ThisentrygivesGDPgrowthonanannualbasisadjustedforinflationandexpressedasa
percent.
GDP realgrowthrate(%)
Years Pakistan Thailand Australia
2000 3.1 4 4.3
2001 4.8 4.2 4.7
2002 3.3 1.4 3.6
2003 4.5 5.2 3.6
2004 5.5 6.7 3
2005 6.1 6.1 3.5
2006 6.6 4.5 2.7
2007 6.6 4.8 2.72008 5.3 4.8 4.3
2009 2.7 2.6 2.3
0
1
2
3
4
5
6
7
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Pakistan
Thailand
Australia
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
4/14
4|P a g e
56
GDP - percapita(PPP)
ThisentryshowsGDPonapurchasingpowerparitybasisdividedbypopulationasof1Julyfor
thesame
year.
GDP percapita(PPP)(US$)
Years Pakistan Thailand Australia
2000 2000 6400 23400
2001 2000 6700 25000
2002 2100 6600 27700
2003 2100 6900 27700
2004 2100 7400 30000
2005
2200
8100
31300
2006 2400 8600 32500
2007 2600 9200 34600
2008 2400 8000 39300
2009 2400 7900 38300
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1 2 3 4 5 6 7 8 9 10
Pakistan
Thailand
Australia
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
5/14
5|P a g e
56
APPLICATIONOFTHEKUZNETSSHYPOTHESIS
KuznetsstestwillbeappliedtothethreeeconomicstakingintoconsiderationtheGiniindex
andthe
GNP
per
capita
to
investigate
and
prove
the
followings:
HO:Inearlystagesofdevelopmentincomeisnotdistributiontendstoworsen,whileinlater
stagesitwillnotimprove,notforminganinvertedUcurve(betweentherelationshipofGNP
percapitaandGiniindex)
HA:Inearlystagesofdevelopmentincomedistributiontendstoworsen,whileinlaterstagesit
willimprove,forminganinvertedUcurve(betweentherelationshipofGNPpercapitaandGini
index)
GINIINDEXOFTHECOUNTRIES
FACTORSAFFECTINGGINIINDEXINPAKISTAN,THAILANDANDAUSTRALIA
AlthoughtherearemanyfactorsresponsibleforthefluctuationintheGiniindexbutincaseof
Pakistan,ThailandandAustraliathemostimportantfactorsresponsibleforincomeinequality,
figuredoutbyliterature,areeconomicdevelopment,financialmarketdevelopment,
governmentexpenditures(sizeofpublicsector),education,inflation,populationgrowthand
openness.
Year Pakistan Thailand Australia
2000 31.2 41.4 35.2
2001 31.2 41.4 35.2
2002 31.2 41.4 35.2
2003 33 43.2 35.2
2004 33 43.2 35.2
2005
33
43.2
35.2
2006 30.6 42 35.2
2007 30.6 42 35.2
2008 30.6 42 35.2
2009 31.2 42.5 35.2
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
6/14
6|P a g e
56
1.EconomicGrowth
Themainfactoraffectingincomeinequalityistheeconomicgrowth.Therelationshipbetween
income inequalityandeconomicgrowthhasreceiveda lotofattentionfromtheresearchers.
Theimpactofeconomicgrowthontheincomeinequalityisambiguous.
2.Financial
Development
Financialmarkethasalsoaneffectonincomeinequality.Theoryprovidesdifferenthypothesis
concerning the financial development and income inequality. Some theories (Banerjee and
Newman, 1993; Galor and Zeira, 1993; Aghion and Bolton, 1997) claim that financial
intermediarydevelopmentispropoor.3.Inflation
Inflationmayhaveastrongredistributioneffectwhichcouldbepositive(throughitseffectson
individualincomewealth)ornegative(throughaprogressivetaxsystem).Itisalsoarguedthat
higherrate
of
inflation
hurts
the
poor
and
middle
class,
relatively
more
than
rich,
because
later
havebetterexcesstofinancialmarketsthatallowthemtohedgetheirexposuretoinflation.
4.GovernmentConsumption
Government Consumption is also one of the factors affecting income inequality. Income
inequalitymay increase or decreasewithgovernmentconsumption. Ifmostof redistribution
through tax and transfer system is toward poor, government consumption might result into
greater inequality.However, itcouldhaveoppositeeffects ifgovernmentconsumption isnot
developmental.
5.
Population
Growth
Difference inpopulationgrowth isanotherfactorexplaining intercountryvariation in income
inequality.Althoughpopulationgrowthgenerallydeclinesaspercapita incomerises,there is
considerablevariation inpopulationgrowthrateamongthecountriesatsimilar income level.
Generally, it is believed that faster population growth is associated with higher income
inequality.Oneofthereasonsisthatdependencyburdenmaybehigherforpoorgroup.
6.Education
One of the most important factors underlying the income inequality is level of access to
education.Thereistwowaylink;ontheonehandanunequaleducationalopportunityleadsto
greater inequality in income distribution by widening the skilled and productivity gap in the
workingpopulation.Ontheotherhandunequalincomedistributiontendstopreventthepoor
investingineducationandacquiringskill.7.OpennessoftheCountryforForeignTrade
A number of studies have attempted to relate trade policy variables to economic growth
(Dollar, 1992; Sachs and Warner, 1995; Edwards, 1992). These studies found that trade
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
7/14
7|P a g e
56
openness is associated with more rapid growth. Dollar and Kraay (2004) found evidence in
support of the view that globalization leads to faster economic growth and a reduction in
incomeinequality.
GNPper
capita
GNPpercapitaiscalculatedbyGDP(GrossDomesticProduct,thevalueofgoodsandservices
producedwithinacountry)plusnetincomereceivedbyresidentsfromnonresidentsources.
GNP/capitaisthetotaldividedbythenumberofpeopleinthecountry.Inotherwords,
GNP/capitaisameasureofnationalincomeperperson.
GNP(US$)
Years Pakistan Thailand Australia
2000 1690 4850 26690
2001
1720
4970
276802002 1800 5220 28920
2003 1930 5600 30390
2004 2060 6030 31370
2005 2230 6420 32840
2006 2390 6970 34320
2007 2530 7480 36080
2008 2590 7760 37250
2009 2670 7980 38470
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1 2 3 4 5 6 7 8 9 10
Pakistan
Thailand
Australia
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
8/14
56
Hypoth
AsPakist
ofthe
K
stagesof
income
income;
2
3
3
3
3
GiniIndex
Year2000200120022003200420052006200720082009
sisProveanisinthe
znetsPove
developme
istribution
thereforeH
9
.50
.5
1
.5
2
.5
3
.5
1690
KUZ
stagesofde
tytest
whe
ntincomed
endstobe
willbeacc
1720 18
ETSSPOP
GNPp
velopingec
applied
to
istribution
moreunifor
eptedand
00 1930
VERTYHAKISTANercapita(x1690
1720
1800
1930
2060
2230
2390
2530
2590
2670
nomics,th
thePakista
endstobe
mandsho
Owillberej
2060 2
GNPperca
YPOTHE
)
reforethe
seconom
orsenbut
simprove
ected.
30 2390
ita
IS
GiniI33
3
3
3
3
3
eisaninve
,proving
th
inthelater
entinthed
2530 2
8|P
dex(y)1.2
1.2
1.2
3
3
3
0.6
0.6
0.6
1.2
tedUstruc
atin
initial
tagesthe
istribution
90 2670
a g e
ure
f
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
9/14
56
Hypoth
AsThaila
oftheK
stagesof
income
income;
4
4
4
4
GiniIndex
Year2000200120022003200420052006200720082009
sisProvendisalsoo
znetsPove
developme
istribution
thereforeH
.5
1
.5
2
.5
3
.5
4850
eofthede
tytestwhe
ntincomed
endstobe
willbeacc
4970 5
T
GNPp
velopingec
appliedto
istribution
moreunifor
eptedand
20 5600
HAILANDercapita(x4850
4970
5220
5600
6030
6420
6970
7480
7760
7980
nomics,th
theThailan
endstobe
mandsho
Owillberej
6030
GNPperc
)
reforether
dseconom
orsenbut
simprove
ected.
6420 697
apita
GiniI4
4
4
4
4
4
4
eisaninver
,provingt
inthelater
entinthed
7480
9|P
dex(y)1.4
1.4
1.4
3.2
3.2
3.2
2
2
2
2.5
tedUstruc
atininitial
tagesthe
istribution
7760 79
a g e
ure
f
0
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
10/14
56
Hypoth
Asindica
Australia
oftheK
develop
distribut
develop
Thereis
Kuznets
5
1
15
2
25
3
35
4
GiniIndex
Year2000200120022003200420052006200720082009
sisProvetedbythe
ischaracte
znetsPove
entecono
ionofinco
d;therefor
oinverted
sHypothesi
26690
orldrankin
izedasad
tytestwhe
iestheinc
ebecomes
HAwillbe
Ustructure
.
27680 289
A
GNPp
gofHDIan
velopedec
appliedto
omedistrib
oneofthef
acceptedan
becauseth
20 30390
USTRALIAercapita(x26690
27680
28920
30390
31370
32840
34320
36080
37250
38470
othereco
nomics,th
theAustrali
tiontends
actorthatp
dHOwillbe
economyi
31370 3
GNPperca
)
omymeasu
reforether
aseconom
tobehomo
rovesthat
rejected.
sdeveloped
2840 3432
pita
GiniI3
3
3
3
3
3
3
3
3
3
ringinstru
eisnoinve
y,provingt
geneous.Th
ustralianec
,provingth
36080
10|P
dex(y)5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
entsthat
tedUstruc
atin
isequal
onomyis
acceptanc
37250 384
a g e
ure
eof
70
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
11/14
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
12/14
12|P a g e
56
FINDINGSFORUNEQUAL/EQUALDISTRIBUTIONONINCOME
SEGMENTS PAKISTAN THAILAND AUSTRALIA
Agriculture&
Manufacturing
Mostlaborforce
demandso
increased
investmentin
agriculturesector
canreduce
inequality.
Inequalityislowdueto
highmanufacturing
activitiesutilizingbig
laborforce.
Focusedonboth
agricultureand
manufacturingtherefore
distributioninequalityis
less.
Servicesector
Expansioninservice
sectorandreal
estatehas
helped
in
reducingthe
unequalincome
distribution.
Veryvastservicesector
especially
tourism
and
tradehasresultedin
moreequalincome
distribution.
Effectivetradeandmore
opportunities
in
service
sectorhavehelpedin
reducingthedistribution
inequality.
Investments
Moreforeign
investmenthas
resultedinmore
inequalityofincome
distributionbecause
onlytopsegmentof
elitesbenefit
from
it
Foreigninvestmentis
hugebutwithlocal
groupshavingstakethat
mayhelpabitin
narrowingthegap.
Moreinvestmentfrom
localgroupstherefore
thedistributionisamong
localpeoplewhichhelp
inreducingthe
inequality.
Government
subsidies
Government
subsidieshavenot
helpedinreduction
ofinequality
becauselowlevel
peoplearenot
earning.
Moreprivatizationhas
helpedinlessinequality
andlocalentrepreneurs
areemerging.
Strongprivatesectorand
verylesssubsidieshave
contributedinmore
equaldistributionof
income.
Government
expenditures
Hugeexpenditures
haveresultedinmoreinequality
andpovertyas
incomeis
concentratedtoa
particularclass.
Governmentexpenditures
havehelpedinalleviating
relativepoverty.
Governmentishas
empoweredtheprivate
sectorsoexpenditure
havenotaffectedthe
poor.
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
13/14
13|P a g e
56
Appendix
DifferencebetweenGDPandGNP
GDP GNP
Definition
Anestimatedvalueofthe
totalworthofacountrys
productionandservices,
calculatedover
the
course
on
oneyear.
GDP(+)totalcapitalgains
fromoverseasinvestment()
income
earned
by
foreign
nationalsdomestically.
Standsfor GrossDomesticProduct GrossNationalProduct
FormulaforCalculation
GDP=consumption+
investment+(government
spending)+(exports
imports)
GNP=GDP+NR(Netincome
fromassetsabroad(Net
IncomeReceipts))
LaymanTerms
Totalvalueofproducts&
Servicesproducedwithinthe
territorialboundaryofa
country
TotalvalueofGoodsand
Servicesproducedbyall
nationalsofacountry
(whetherwithin
or
outside
thecountry)
BIBLIOGRAPHY
Contents
http://en.wikipedia.org/wiki/Kuznets_curve http://en.wikipedia.org/wiki/Lorenz_curve http://www.indexmundi.com/pakistan/distribution_of_family_income_gini_index.html http://www.tradingeconomics.com/Analytics/About
Us.aspxhttp://www.diffen.com/difference/GDP_vs_GNP
http://ucatlas.ucsc.edu/gnp/gnp.html http://www.perc.org/articles/article688.php.
TradePolicies
Somereformsin
pastfewyears
havehelpedin
moretradewhich
isagoodsignto
reduceinequality
Haveaveryeffectiveand
vasttradewithmany
countrieswhichincludes
FTAwithAustralia.Thisis
amajorsourcein
reducingthe
inequality
Haveabignetworkof
tradeandFTAswith
countrieslikeThailand.
Thisreducesthe
inequalitywitheffective
distributionof
income
-
8/8/2019 Income distribution inequality in Pakistan, Thailand and Australia _using Gini index, GDP and application of Kuznets
14/14
14|P a g e
56
MillsJH,WaiteTA(2009)Economicprosperity,biodiversityconservation,andtheenvironmentalKuznetscurve.EcologicalEconomics68(7):20872095
http://www.georgetown.edu/faculty/aml6/pdfs%26zips/ups%2520and%2520downs.pdf http://www.idrc.ca/uploads/userS/10515499840pakistanreport10.pdf D.P.Doessel,AbbasValadkhani,(1998)"Economicdevelopmentandinstitutionalfactors
affectingincome
distribution:
the
case
of
Iran,
1967
1993",
International
Journal
of
SocialEconomics,Vol.25Iss:2/3/4,pp.410 423
http://www.pu.edu.pk/economics/pesr/PDFCurrentIssue/PESR%20Summer%202008/1%20HAFEEZ%20Income%20Distribution.pdf
Diagrams
*maxipedia.com **http://en.wikipedia.org/wiki/Image:Kuznets_curve.png
GDP,GNP
and
Gini
figures
are
taken
from
http://www.google.com/publicdata http://hdr.undp.org/en/media/HDR_2000_EN.pdf http://hdr.undp.org/en/media/completenew1.pdf http://hdr.undp.org/en/media/HDR_2002_EN_Complete.pdf http://hdr.undp.org/en/media/hdr03_complete.pdf http://hdr.undp.org/en/media/hdr04_complete.pdf http://hdr.undp.org/en/media/HDR05_complete.pdf http://hdr.undp.org/en/media/HDR06complete.pdf http://hdr.undp.org/en/media/HDR_20072008_EN_Complete.pdf http://hdr.undp.org/en/media/HDR_2009_EN_Complete.pdf www.indexmundi.com