The effect of economic complexity and shadow economy on income inequality in countries of the Organization for Economic Cooperation and Development (OECD)

Document Type : Original Article

Authors

1 semnan -semnan uni- economic department

2 semnan- semnan uni- economic department

Abstract

Although various studies have examined the effect of economic complexity and the shadow economy on income inequality, the nonlinear effect of economic complexity and the shadow economy on income inequality, which plays an important role in reducing problems in the economic, political and social fields of countries, has been investigated to a limited extent. has taken. The main purpose of this article is to investigate the impact of economic complexity and shadow economy on income inequality in 29 member countries of the Organization for Economic Cooperation and Development (OECD) during the period of 1995-2020. For this purpose, the Gini coefficient is considered as an index of income inequality and an index of economic complexity, shadow economy, GDP per capita and trade openness. The results obtained from the self-explanatory approach with wide panel breaks (Panel ARDL) show that with the increase of the shadow economy, income inequality first has an upward trend and after a stage it starts to decrease, in other words, an inverted U-relationship. There is a form between income inequality as a dependent variable and shadow economy as an explanatory variable in the studied countries. In addition, there is a U-shaped relationship between income inequality as a dependent variable and economic complexity as an explanatory variable. As economic complexity increases, income inequality first decreases and then gradually increases. Also, empirical findings show that trade openness reduces income inequality, while economic growth increases inequality. Based on this, it is suggested that considering the complexity of these relationships, politicians and statesmen should consider the socio-economic status of these two issues (economic complexity and shadow economy) when formulating policies related to income distribution.

Although various studies have examined the effect of economic complexity and the shadow economy on income inequality, the nonlinear effect of economic complexity and the shadow economy on income inequality, which plays an important role in reducing problems in the economic, political and social fields of countries, has been investigated to a limited extent. has taken. The main purpose of this article is to investigate the impact of economic complexity and shadow economy on income inequality in 29 member countries of the Organization for Economic Cooperation and Development (OECD) during the period of 1995-2020. For this purpose, the Gini coefficient is considered as an index of income inequality and an index of economic complexity, shadow economy, GDP per capita and trade openness. The results obtained from the self-explanatory approach with wide panel breaks (Panel ARDL) show that with the increase of the shadow economy, income inequality first has an upward trend and after a stage it starts to decrease, in other words, an inverted U-relationship. There is a form between income inequality as a dependent variable and shadow economy as an explanatory variable in the studied countries. In addition, there is a U-shaped relationship between income inequality as a dependent variable and economic complexity as an explanatory variable. As economic complexity increases, income inequality first decreases and then gradually increases.

Keywords

References

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Public Sector Economics Studies
Volume 2, Issue 3 - Serial Number 5
December 2023
Pages 335-352

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  • Receive Date: 21 November 2023
  • Revise Date: 07 January 2024
  • Accept Date: 07 January 2024

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