Economic Freedom and Income Inequality: An Empirical Note for the Post-GFC Period

Year 2024, , 1049 - 1072, 25.12.2024

Begüm Çoban , Dilek Durusu Çiftçi

https://doi.org/10.26745/ahbvuibfd.1425466

Abstract

This study examines the dynamic relationship between economic freedom and income inequality in 148 countries, focusing on the post-Global Financial Crisis (GFC) period. Utilizing the System-GMM estimation methodology to address endogeneity concerns, the research also reveals nuanced patterns in both developed and emerging markets. The analysis identifies a negative and statistically significant effect of the Economic Freedom Index (EFI) and all of its sub-components on income inequality. Our findings reveal three important implications: (i) The effects of sub-indicators are quite close to each other in emerging markets, but differ significantly in developed economies, suggesting that policymakers in developed countries should pay more attention to certain areas of freedom when implementing policies to reduce inequalities. (ii) For all panels, the surprisingly small effects of government size underscores the weak role of government spending in mitigating inequality. (iii) Regulatory efficiency emerges as a key factor in reducing income inequalities, urging policymakers to prioritize improvement in regulatory processes. Overall, this study enriches policiymakers’ understanding and offers actionable insights for addressing global income inequality.

Keywords

Income Inequality; Economic Freedom; Emerging Markets, Developed countries, Panel Data Analysis.

Ekonomik Özgürlükler ve Gelir Eşitsizliği: KFK Sonrası Dönem için Ampirik Bir Not

Abstract

Bu çalışma, 148 ülkede Küresel Finansal Kriz (KFK) sonrası döneme odaklanarak ekonomik özgürlükler ve gelir eşitsizliği arasındaki dinamik ilişkiyi incelemektedir. İçsellik problemini dikkate alarak Sistem-GMM metodolojisinin kullanıldığı çalışmada, hem gelimiş hem de gelişen piyasalardaki farklı dinamikler araştırılmaktadır. Analiz sonuçları, Ekonomik Özgürlükler Endeksi’nin ve tüm alt bileşenlerinin gelir eşitsizliği üzerinde negative ve istatistiksel olarak anlamlı bir etkisi olduğunu göstermektedir. Bulgular üç önemli çıkarım ortaya koymakradır. (i) Alt göstergelerin etkileri gelişen piyasalarda birbirine oldukça yakınken, gelişmiş ekonomilerde önemli ölçüde farklılık göstermektedir; bu da gelişmiş ülkelerdeki politika yapıcıların eşitsizlikleri azaltmaya yönelik politika uygularken bazı özgürlük alanlarına daha fazla dikkat etmeleri gerektiğini göstermektedir. (ii) Tüm paneller için, hükümet büyüklüğünün şaşırtıcı derecede düşük etkileri, hükümet harcamalarının eşitsizliği azaltmadaki zayıf rolünün altını çizmektedir. (iii) Düzenleyici etkinlik, gelir eşitsizliklerinin azaltılmasında kilit bir faktör olarak ortaya çıkmakta ve politika yapıcıları düzenleyici süreçlerin iyileştirilmesine öncelik vermeye teşvik etmektedir. Sonuç olarak, bu çalışma küresel gelir eşitsizliğinin ele alınmasında politika yapıcıların anlayışını zenginleştirmekte ve uygulanamaya dönük bilgiler sunmaktadır.

Keywords

Gelir Eşitsizliği, Ekonomik Özgürlükler, Gelişen Piyasalar, Gelişmiş Ekonomiler, Panel Veri Analizi

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