Iranian Journal of Trade Studies

Iranian Journal of Trade Studies

The Effects of Rent from Natural Resources, Shadow Economy and Human Development Index on Income Inequality: a Cross-Country Analysis

Document Type : Research Paper

Authors
Akram Roozdar 1
mostafa Rajabi 2
farzad karimi 3
1 PhD student in Health Economics, School of Law and Economics, Khomeini Shahr Branch, Islamic Azad University, Khomeini Shahr, Isfahan, Iran.
2 Assistant Professor, Department of Economics, Faculty of Law and Economics, Khomeini Shahr Branch, Islamic Azad University, Khomeini Shahr, Isfahan, Iran (corresponding author).
3 Associate Professor of International Economics, Department of Management, Mobarake Branch, Islamic Azad University, Mobarake, Iran
10.22034/ijts.2024.2015888.3920
Abstract
Empirical studies of the economies of countries with different income levels in terms of access to natural resources in recent decades have shown that the abundance of natural resources and the income from its sale can be considered a valuable capital for countries which with government investments in the major  infrastructures, it provided economic progress and equal distribution of incomes. On the other hand, it makes income distribution unequal by creating opportunities for rent-seeking and forming a shadow economy. The existence of spatial effects suggests the possibility of increasing or decreasing inequality in a country due to internal policies in neighboring countries. Therefore, the aim of this research is to investigate the effect of rent of abundance of natural resources, shadow economy and human development index on income inequality in the form of spatial econometrics using the weighted distance matrix among 75 countries in 4 income groups with the Atlas method in the time period (1990-2021), using a spatial dynamic panel pattern model (spregfext). The results indicated that the expansion of income inequality is caused by the increase in the rent of natural resources, regardless of the income grouping of the countries; The spatial effects of this variable in the same group and neighboring countries are positive but insignificant, except in 21 countries with high average income. The size of the shadow economy in countries with low per capita income has the greatest impact on income inequality; But the size of the shadow economy of countries with the same income group does not affect the distribution of income in neighboring countries. The impact of the human development index on income inequality is decreasing, but the domestic policies of countries with low and medium per capita income in the field of human capital development are ineffective on the distribution of income in neighboring countries. Also, an increase in inequality in one period leads to the continuation of an increase in inequality in the following periods.
Keywords
Abundance of Natural Resources / Shadow Economy / Income Distribution /
Human Development Index / Spatial Dynamic Panel Model
 
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  • Receive Date 16 November 2023
  • Revise Date 27 January 2024
  • Accept Date 21 February 2024