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Economic Freedom and Income Inequality: Evidence from a Panel of Global Economies— A Linear and a Non‐Linear Long‐Run Analysis
Author(s) -
Apergis Nicholas,
Cooray Arusha
Publication year - 2017
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12137
Subject(s) - economics , economic freedom , cointegration , economic inequality , econometrics , inequality , index of economic freedom , index (typography) , robustness (evolution) , panel data , income inequality metrics , macroeconomics , demographic economics , mathematics , mathematical analysis , biochemistry , chemistry , world wide web , computer science , market economy , gene
This study employs panel data from 138 countries (with unbalanced time frameworks) to investigate the relationship between economic freedom and income inequality. Both linear and non‐linear cointegration methodologies are used to identify a long‐run equilibrium relationship between: (i) the overall Economic Freedom of the World index and income inequality, and (ii) the major areas of the index and income inequality. The linear long‐run parameter estimates document that the association turns out to be negative, while the non‐linear long‐run parameter estimates illustrate that above a threshold point the association between economic freedom and income inequality is negative, while below this threshold point, the association turns out to be positive. The empirical findings survive a number of robustness tests, such as alternative measures of income inequality.