Income inequality and economic growth

A central issue in the growth literature is whether initial conditions matter for income disparity among nations. If they don\u27t, then countries will converge to a single regime once the structural features of the economies are controlled for. If they do, then countries will converge to multiple regimes even if the structural features are controlled for. This dissertation is designed to investigate whether the world is characterized by a single or multiple regimes. The first paper investigates whether the predictions of a particular multiple-regime model due to Galor and Zeira (1993) are borne out by the data. The baseline analysis is carried out with a sample of 46 countries (for which data are available) during the period 1970-2000. The analysis produces results that are consistent with the model. These results are broadly robust to different model specifications, sample periods, and permutations of alternative control variables. We take these results as evidence in support of the multiple-regime models. The second paper examines whether the conclusions of another multiple-regime model due to Kremer and Chen (2002) are borne out by the data. The baseline analysis is also carried out with a sample of 46 countries during the period 1970-2000. The analysis produces results that are consistent with the model. These results are broadly robust across different human capital differential variables, different sample sizes, and additional control variables. We take these results as evidence in support of the multiple-regime models. The third paper revisits the convergence hypothesis test using a new stochastic dominance method. The baseline analysis is carried out with a sample of 100 countries during the period 1960-2000. Together with the robustness check, the analysis yields results that are consistent with the club convergence hypothesis. We take these results as evidence in support of the multiple-regime models

Inequality, Human Capital and Development: Making the Theory Face the Facts

Recent theoretical contributions assert that income inequality impacts negatively human capital accumulation, and consequently long-run growth. Galor and Zeira (1993) show that such a relationship works primarily through financial constraints, while de la Croix and Doepke (2003) demonstrate that the relationship could also work via differential fertility between poor and rich. In this paper, we first test the inequality-human capital-output hypothesis in a sample of 46 countries for the period 1970—2000. In the baseline estimation specification and various robustness checks, we obtain results that lend strong support to this relationship. Second, we examine which of the two mechanisms, finds more support in the data. and show evidence in favor of the differential fertility mechanism.Income inequality, financial constraints, fertility differentials, human capital, economic growth

The impact of price change on consumer choice of automobiles

The objective of this paper is to examine whether a change in the price of a given model of national automobiles affects the choice of alternative car models by consumers. Four models of national automobiles - Saga 1.3cc, Saga 1.5cc, Wira 1.3cc, and Wira 1.5cc - are considered over the period 2000–2002. The results based on the conditional logit model indicate that all of the alternative models are substitutes to each other

Inflation, Deterrence and Crime: Evidence from Nigeria using Bounds Test Approach

This study examines the link between inflation and crime with an alternative way of reducing crime in Nigeria. The alternative to crime decrease tool apart from traditional deterrence measures is domestic investment. Besides, explanation on how inflation has affected crime in Nigeria rest on the strain and rational choice theory. Also, data set from 1970 to 2013 estimated by using the autoregressive distributed lag model. The results showed that inflation affects crime and other property crimes of armed robbery, false pretence/ cheating and arson at the 5% level of significance. In addition, domestic investment reduces crime statistically at 1% when compared with the prosecution that weakly reduces crime significantly at 10%. Punishment found weak to reduce crime in the long-run significantly. Based, on the results, this study suggests that inflation should be check and controlled, the crime deterrence institutions should be strengthen and domestic investment improved on to reduce crime in Nigeria. Keywords: Inflation, crime, strain, deterrence, autoregressive distributed model

The trade-off between child quantity and child quality: An application of the Kremer-Chen model to households in rural Terengganu, Malaysia

The idea of the trade-off between child quantity and child quality has long been documented in economics. In the past, this trade-off has been attributed to the rising marginal cost of child quantity and quality. In recent years, this trade-off has been attributed to a declining direct cost of childrearing and an escalating opportunity cost of childrearing induced by rising household income. Exploiting a micro data set from rural Terengganu, we revisit the idea based on this new postulate.Our goal is to investigate whether a rise in household income has a positive impact on child quality and a negative impact on child quantity. In a series of empirical exercises, we find that household income has a positive impact on both child quantity and child quality.We take these findings as evidence that there is no trade-off between child quantity and child quality among rural households in Terengganu, Malaysia

The trade-off between child quantity and child quality and the public provision of education: A case study in rural Terengganu, Malaysia

The objective of this paper is to examine whether the theory of the child quantity-quality (CQQ) trade-off developed by Becker and Lewis (1973) is borne out by the data from a developing country.In brief, the theory states that households behave differently with respect to their mixture of child quantity and child quality depending on their standards of living (i.e. low-income households tend to choose child quantity at the expense of child quality, and the converse is true for high-income households).If the government provides enough support for education, however, this trade-off might be undermined.Using a sample of 885 children from a survey of 2,500 households in rural areas in Terengganu in 2009, we conducted an empirical analysis on the relationship between child quantity and child quality.In the baseline estimation as well as in a series of robustness check, our key findings are that there is a positive yet insignificant impact of child quantity on child quality.Accordingly, we take these results as mild evidence against the CQQ trade-off which, in turn, can be attributed to the magnitude of the public provision of education in Malaysia

Fuel subsidy reform in Malaysia: An assessment on the direct welfare impact on consumers

This paper investigates the issue of fuel subsidy reform in Malaysia by analysing the direct welfare impact resulting from fuel subsidy removal.Using the Household Expenditure Survey 2004/2005 with a sample of 4227 households, the analysis is carried out by segregating households into 3 different income groups and the welfare impact due to subsidy cut is measured.The results show that the reduction in welfare due to higher price is larger for the middle 40% compared to the top and the bottom 40%.This is due to the fact that the middle 40% has a larger budget share on fuel.Fuel subsidies are found to be costly in protecting poor households due to substantial leakage of benefits to higher income group but the welfare loss for the lower income group due to subsidy cut is somewhat higher in relative term due to the smaller size of their income. Thus, while subsidy reform is undeniably necessary, our findings suggest that it must be carried out cautiously. Our study suggests that the reform must be accompanied with strategies and programs to mitigate the welfare loss, not only for the lower income but also the middle income group as well

Social capital and educational attainment among rural community in Malaysia

The determinants of educational attainment among children have become one of the main research agenda among scholars, educationists and economists alike.In most studies, the focus is on the relationship between educational attainment and factors such as the quality of teachers, schools, educational technologies, curriculum design, the financial and human capital aspect of the families and the ability of children themselves. Recently, the focus has been expanded to explore the relationship between social capital and educational attainment.As an addition to the existing literature, this paper attempts to investigate the impact of social capital on educational attainment using a regression analysis based on a sample of 2500 households, gathered from a rural community in Terengganu, Malaysia. Six domains of social capital are used to arrive at the index of social capital.The argument advanced in this paper is that social capital, which could be viewed as the outcome of networking, cooperation and trust at the household level, is expected to have a positive impact on a child’s educational attainment.Towards this end, we regress children’s education attainment on social capital along with other relevant independent variables, i.e. family, children, school and neighbourhood characteristics. Interestingly, the result of our study reveals that the level of social capital that a family has, is found to be significant and has the expected positive sign. This finding implies that social capital at the household level appear to be a critical factor in determining a child’s educational attainment. Thus, our finding lends support to the idea that social capital is a good predictor of children’s is educational attainment