The Effect of Geopolitical Risk on Income Inequality: Evidence from a Panel Analysis

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5 Citations (Scopus)

Abstract

The current paper empirically explores the geopolitical risk influence on income inequality. It assumes that geopolitical risk’s effects change over time. That is because the geopolitical events’ reoccurrence and the interaction with unobserved variables impose permanent adjustments in the decision process. Therefore, we employ the two-way fixed Prais-Winsten regression with panel-corrected standard errors to estimate this relationship on a yearly basis. Our paper extracts evidence from 18 countries during the period (2007–2020). It finds that the effect of geopolitical risk on income inequality is positive or geopolitical risk impairs income inequality. Moreover, geopolitical risk and its interaction with the unobserved variables can mitigate or expand income inequality, though it will not abolish it. Our results’ robustness check using the Palma ratio as the dependent variable instead of the Gini coefficient produces similar results. Our paper presents a group of policy implications extracted from our results.

Original languageEnglish
Pages (from-to)47-66
Number of pages20
JournalSocial Indicators Research
Volume167
Issue number1-3
DOIs
Publication statusPublished - Jun 2023
Externally publishedYes

Keywords

  • Geopolitical risk
  • Income inequality
  • Panel analysis
  • The Gini index
  • The Palma ratio

ASJC Scopus subject areas

  • Developmental and Educational Psychology
  • Arts and Humanities (miscellaneous)
  • Sociology and Political Science
  • General Social Sciences

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