A presente dissertação estuda empiricamente a relação entre a inflação e a distribuição de renda, utilizando dados de diversos países. A literatura empírica - baseada principalmente nos trabalhos de Deininger e Squire (1996) e Romer e Romer (1998) - tem se concentrado no estudo dos efeitos que a inflação pode ter sobre a desigualdade, e obteve diferentes conclusões sobre os mecanismos e resultados dessa influência. No entanto, alguns trabalhos teóricos recentes argumentam que há causalidade reversa nessa relação, com a desigualdade causando mudanças na inflação. Dessa forma, nossas contribuições serão: (i) tentaremos isolar os impactos da inflação sobre a distribuição de renda, usando como variáveis de controle: ciclos de crescimento, desenvolvimento econômico, questões regionais e instituições; (ii) procuraremos analisar a causalidade desta relação, utilizando como instrumento da inflação o aumento da quase-moeda. Nossos resultados indicam que há uma forte correlação entre inflação e desigualdade de renda. Porém, essa correlação não é robusta ao controle por variáveis omitidas e problemas de endogeneidade. / This dissertation estimates the relationship between inflation and income distribution, using cross-country data. The empirical literature based mainly on Deininger and Squire (1996) and Romer and Romer (1998) has focused on the impact of inflation on inequality, with mixed results. Nonetheless, recent theoretical work has suggested that causality may actually run in the opposite direction. Our contribution is twofold: (i) we try to estimate more precisely the effect of inflation on inequality by controlling for variables such as growth cycles, economic development, regional effects and institutions; (ii) we address the issue of reverse causality by using the growth rate of quasi-money as an instrument for the inflation rate. Our results indicate that there is a strong positive correlation between inflation and income inequality. Nevertheless, this correlation is not robust to controlling for omitted factors and endogeneity problems.

The issue of economic growth and income inequality is always the hottest topic among economists. Over the past decades to the onset of the global economic crisis, a large majority of OECD countries have experienced widen income inequality. More recently, the break out of the Occupy Wall Street Movement has rapid spread and recaptured much attention. One of the most driving themes is a country’s economic growth and embarrassing income inequality; it also reflects a broad-based frustration about how the sophisticated financial development affects the overall economy. To understand the impact of financial development on economic growth and income distribution has more important implications than ever. This dissertation is an effort to study these issues with three studies. / In Study 1, a simplified version of Diamond and Dybvig (1983) model of liquid provision is embedded into a framework of overlapping-generations model. In the model, the agents are subject to idiosyncratic liquidity shocks, and have to make their own mind whether to hold the savings on hand or invest in a long-term illiquid technology and how to allocate. By comparing the autarky economy and the economy with financial intermediaries, our results suggest the existence of both benefits and costs of financial intermediaries and the net effects tend to differ with the development stage of the underlying economy. / In Study 2, the links between economic growth and income inequality are reexamined using a newly compiled panel dataset. This study mainly address three empirical questions: 1) Does inequality increase in the early stages of development and then decline when per capita income reaches a certain level? 2) Do countries with unequal income distribution experience slower economic growth than more egalitarian countries? 3) What might be the determinants of economic growth and income inequality, and whether they are simultaneously determined? Our results show that the links between economic growth and income inequality are quite complex and their determinants are not mutually exclusive. / In Study 3, the impacts of financial development on economic growth and income inequality are explored empirically. By collecting proxy variables measuring different aspects of financial development, this study tests 1) Is financial development pro-growth? In other words, does financial development always exert a positive impact on economic growth? 2) Is financial development pro-poor? By pro-poor, we mean whether financial development significantly improve income distribution by disproportionately boosting the incomes of the poor. Our results indicate that financial development is not always pro-growth, taking into account of country-specific effects, endogeneity and potential heteroskedasticity. In addition, after controlling for the overall growth, financial development is not pro-poor. It is more likely for the rich to get more benefits from both bank-based and market-based developments. / 經濟增長和收入不平等的問題始終是經濟學家中最熱門的話題。在過去的幾十年到近年全球經濟危機爆發，大多數經濟合作與發展組織（OECD）國家都經歷了收入不平等的擴大。近年來爆發的"佔領華爾街"運動在全球迅速蔓延，並成為關注的焦點。其中一個最為重要的導火索是國家的經濟增長和愈加惡化的收入不平等，同時也反映出廣大民眾對於金融業發展會如何影響整體經濟的困惑。因此，理解金融發展對經濟增長和收入分配的影響變得比以往任何時刻都更具有重要的意義。本論文通過三篇研究從不同的角度分析這一問題。 / 在研究一中，我們把一個簡化的Diamond 和Dybvig（1983）模型嵌入代際交疊模型的框架中。在這個模型中，每個人都會受到流動性的衝擊，因此必須決定是將儲蓄持有在手邊還是投資於長期的不能流動的技術中，以及如何分配。通過比較自給自足的經濟和有金融機構存在下的經濟，我們的研究結果表明，金融機構是把雙刃劍，其淨效應取決於相關經濟體的發展階段。 / 在研究二中，我們用新編譯的面板資料重新檢驗了經濟增長和收入不平等之間的聯繫。這篇研究主要回答了三個問題：1）收入不平等是否在經濟發展的早期增加，在人均收入達到一定水準後下降？2）收入不平等的國家是否比收入平等的國家經濟增長緩慢？3）經濟增長和收入不平等的決定因素是什麼，二者是否是同時決定的？我們的研究結果表明，經濟增長和收入不平等之間的聯繫相當複雜，並且其決定因素也不是相互排斥的。 / 在研究三中，我們通過實證的方法探索金融發展對經濟增長和收入不平等的影響。通過用不同變數來衡量金融發展的各個方面，這篇研究主要回答了兩個問題：1）金融發展是否促增長？換句話說，金融發展對經濟增長是否都產生了積極的影響？2）金融發展是否有利於窮人？所謂有利於窮人，我們是指金融發展能大幅提高窮人的收入，從而顯著改善收入分配。我們的研究結果顯示，在考慮了國家影響、內生性和潛在異方差等因素後，金融發展並不總是有利於經濟增長。另外，剔除整體經濟增長的影響，金融發展也並不利於窮人。相反，富人更有可能從銀行和市場為主的金融發展中得到更多的實惠。 / Yu, Yao. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2013. / Includes bibliographical references (leaves 192-207). / Abstracts also in Chinese. / Title from PDF title page (viewed on 20, December, 2016). / Detailed summary in vernacular field only. / Detailed summary in vernacular field only. / Detailed summary in vernacular field only. / Detailed summary in vernacular field only.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Alfred P. Sloan School of Management, 1981. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY. / Bibliography: leaves 410-416. / by Khalid Saeed. / Ph.D.

by Lee Chi Yung. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1996. / Includes bibliographical references (leaves 82-87). / by Lee Chi Yung. / Chapter Chapter One --- Introduction --- p.1 / Chapter Chapter Two --- Nature of theroblem and Review of Literature --- p.5 / Chapter 2.1. --- Education Expansion and Earnings Distribution --- p.7 / Chapter 2.2. --- Economic Development and Structural Change --- p.19 / Chapter 2.3. --- Structural Change and Earnings Distribution --- p.21 / Chapter 2.4. --- Education Expansion and Economic Restructuring --- p.24 / Chapter 2.5. --- The Researchroblem --- p.26 / Chapter Chapter Three --- "Economic Restructuring, Educational Development and Income Distribution in Hong Kong" --- p.28 / Chapter 3.1. --- Economic Growth and Restructuring --- p.28 / Chapter 3.2. --- Educational Development in Hong Kong --- p.36 / Chapter 3.3. --- Income Distribution --- p.44 / Chapter Chapter Four --- Research Methodology and the Hypotheses --- p.47 / Chapter 4.1. --- Researchroblems --- p.47 / Chapter 4.2. --- Theoretical Framework and Research Methodology --- p.48 / Chapter 4.3. --- The Data Set --- p.55 / Chapter Chapter Five --- Results and Interpretations --- p.59 / Chapter 5.1 --- Changes in Variances of log Earnings --- p.59 / Chapter 5.2 --- Changes in Means of log Earnings --- p.67 / Chapter 5.3 --- Summary --- p.76 / Chapter Chapter Six --- Conclusion --- p.77 / Bibliography --- p.82

Given the widely-accepted finding that countries with greater income inequality also experience less income mobility across generations (Corak, 2013; Krueger, 2012), it is expected that American mobility has decreased with rising income inequality in recent decades (Aaronson & Mazumder, 2008; Corak, 2013; Mazumder, 2012). However, mobility has remained unchanged (Chetty, Hendren, Kline, Saez, & Turner, 2014), and is unresponsive to changes in income inequality (Bloome, 2015). These findings raise questions as to why intergenerational income mobility in the U.S. has not fallen during the periods when income inequality has sharply risen. To address these questions, the dissertation focuses on two aims. The first aim is to examine the association between intergenerational income mobility and income inequality in the United States. The second aim is to examine intergenerational income mobility with respect to income inequality and government spending. The main data for this dissertation come from the National Longitudinal Study of Youth 1979 (NLSY79). The basic sample includes 4,824 parents-children pairs. I aggregate the state-level data from several different resources such as the IRS’s Statistics of Income, U.S. Census of Governments, and the U.S. Bureau of Labor Statistics. The state-level sample includes 220 state-year observations. Overall, the intergenerational elasticity (IGE) of income is about 0.43, and the analysis indicates that the US in reality is highly immobile, especially when looking at the extreme income groups of the bottom and the top. This study finds that rising income inequality acts to strengthen the importance of parental family income to child’s income. Particularly, the evidence that higher income inequality decreases intergenerational income mobility is clearer when migration problems are addressed. This study extends to include government spending and provides evidence that additional government spending contributes to promoting intergenerational income mobility. Moreover, government spending moderates the effects of income inequality on intergenerational income mobility. This evidence indicates that government spending plays a role in preventing the decrease in intergenerational income mobility by offsetting the consequences of income inequality on mobility. A number of sensitivity tests confirm that the main results are robust and reliable. However, these results are not uniform across the subgroups—defined by gender, race, and family structure. There are wide variations in the IGE, the effects of income inequality and government spending across the subgroups and by different income measures. The findings of this study have implications for social work policy and practice. Income inequality matters since it hinders the equal opportunity to succeed, especially for children from low-income families. This study demonstrates that government spending plays an important role in promoting intergenerational income mobility by offsetting the consequences of income inequality. Yet, this study does not claim that the effects of increased government spending for increased intergenerational mobility are limitless. Without efforts to connect low-income families to government policies and programs, economically disadvantaged children would not benefit in their human capital and skill development from increases in government spending.

O modelo de financiamento do sistema previdenciário brasileiro é o de repartição simples, bastante sensível a mudanças estruturais de caráter econômico. Algumas dessas mudanças estruturais que afetaram a previdência, tiveram origem na Constituição de 1988, no crescente envelhecimento da população, no aumento da informalidade de vínculo trabalhista e em problemas políticos e administrativos no regime de previdência. Tais mudanças levaram a previdência a apresentar déficits elevados a partir de meados dos anos 90. Verificou-se que alguns princípios previdenciários como solidariedade, redistribuição e eqüidade não foram respeitados. Observou-se a existência de distorções no valor de aposentadorias e pensões, privilegiando poucos e evidenciando a existência de problemas no modelo de repartição simples. Este trabalho teve como objetivo principal verificar se o rendimento das aposentadorias e pensões contribuiu para aumentar a desigualdade da distribuição de renda no Brasil. Utilizou-se a metodologia de decomposição do índice de Gini, que consiste em determinar a contribuição de cada parcela do rendimento para a desigualdade total, utilizando-se os dados da Pesquisa Nacional de Amostras Domiciliares (PNAD) de 1981 a 2001. Através dos estratos de rendimento domiciliar per capita agregados, verifica-se que a participação do estrato no rendimento de aposentadorias e pensões é, em geral, maior do que a sua participação no rendimento de todos os trabalhos. Nota-se também que a razão de concentração de aposentadorias e pensões, ao longo do período analisado, é superior à razão de concentração do rendimento do trabalho principal em nove dos dezesseis anos analisados. No período de 1998 a 2001 a razão de concentração de aposentadorias e pensões é superior ao índice de Gini e à razão de concentração do rendimento de trabalho principal. Observou-se que, ao longo do período analisado, aumentou a participação de aposentadorias e pensões na renda total, e a sua razão de concentração cresceu. O rendimento de aposentadorias e pensões contribuiu com a segunda maior parcela na formação do índice de Gini. Essa participação teve significativo aumento a partir de 1993. Os resultados permitem concluir que a parcela de rendimento das aposentadorias e pensões contribuiu para aumentar a desigualdade da distribuição da renda no Brasil em seis dos dezesseis anos analisados. Observa-se que de 1998 a 2001 essa contribuição tem-se intensificado. A persistência dessa situação é insustentável para o país, porque inviabilizará a Previdência Social, devido ao déficit crescente que onera as contas públicas e também porque não é justificável que rendimentos diretamente controlados pelo Estado, como as aposentadorias e pensões, contribuam para aumentar a desigualdade da distribuição da renda no país. Isso mostra que existe necessidade de reforma do sistema previdenciário brasileiro. / The financing model of the Brazilian social security system is that of simple partition, quite sensitive to economic structural changes. Some of the structural changes which affected social security were originated in the 1988 Constitution, in the increasing population aging, in the rise of employment relationship informality, and in political as well as administrative problems concerning the social security system. Such changes led social security to present high deficits from middle 1990s on. It was verified that some principles for social security, such as solidarity, re-distribution, and equality, were not respected. The existence of distortions in retirement and pension values were observed, giving privilege to few people and evidencing the existence of problems in the model of simple partition. The present work aimed primarily at verifying whether the retirement pension income contributed to increase the inequality in the income distribution in Brazil. The methodology employed was that of decomposition of Gini's index, which consists in determining the contribution of each income part to the total inequality, using data provided by Household Samples of National Research from 1981 until 2001. By means of aggregated per capita household income layers it was verified that the participation of the layer in the pension income is, in general, higher than its participation in the income of all works. It may be observed that the retirement and pension concentration ratio, along the period analyzed, is higher than the main work income concentration ratio in nine of the sixteen years under analysis. In the period that ranges from 1998 until 2001, the retirement and pension concentration ratio is higher than Gini's index and the main work concentration ratio. It was observed that, along the period analyzed, the participation of pensions in the total income increased, and its concentration ratio had a rise. The retirement pension income was the second highest part in the formation of Gini's index. Such participation had a significant raise from 1993 on. Based on the results, the conclusion drawn is that the retirement pension income part contributed to increase the inequality of income distribution in Brazil in six of the sixteen years analyzed. The persistence of such situation is unsustainable for the country, since it will make Social Security unfeasible due to the increasing deficit which burdens public accounts and also because it is unjustifiable that incomes that are directly controlled by the Sate, like retirements and pensions, may contribute to the increase of inequality in the income distribution in the country. This shows that there is a need for change in the Brazilian social security system.

For at least a century academics and governmental researchers have been developing measures that would aid them in understanding income distributions, their differences with respect to geographic regions, and changes over time periods. It is a fascinating area due to a number of reasons, one of them being the fact that different measures, or indices, are needed to reveal different features of income distributions. The existing indices, the Gini index, the Bonferroni index and the Zenga index are intrinsically linked each other, whereas their emphasis are laid differently. One of the limitations of the existing indices is that they provide an overall measurement for the whole society and cannot distinguish the distributions with the same index value. This thesis works on the extension of the three indices and proposes a new index which can make comparison between any groups with different income level, for example, the richest group and the poorest group. The new index satisfies the axioms of inequality measures. The statistical inferential results of the new index are derived and their performance are tested by a simulation study and the results are used to analyze the income data of Hong Kong from Census and Statistics Department, HKSAR. / 近一個世紀學術界和政府間的研究人員一直致力於創造和發展可以幫助理解不同國家地區收入分布和差異的測度。很多原因使之成為令人感興趣的研究領域，需要不同測度或指數用以理解收入分布的不同特征便是原因之一。Gini指數，Bonferroni 指數和Zenga指數等現有指數在本質上相互聯系，但側重點各有不同。可以對整個社會有一個整體測度而不能對具有相同指數的收入分布進行區分是現有指數的共同缺陷。本論文基於以上三種指數提出一種新的指數可以在不同收入水平間進行比較，例如，最富有階層和最貧困階層。新指數滿足收入不均測度的相關性質。本論文推導出新指數的相關統計推理結果並用數值模擬實驗進行了測試，最終用其結果對香港政府統計處的人口普查數據進行了分析。 / Chen, Teng. / Thesis M.Phil. Chinese University of Hong Kong 2015. / Includes bibliographical references (leaves 59-61). / Abstracts also in Chinese. / Title from PDF title page (viewed on 05, October, 2016). / Detailed summary in vernacular field only.

Le but de cette thèse est d’analyser les effets de court terme de la répartitionfonctionnelle des revenus sur la demande agrégée et ses composants en Corée du Sud,Thaïlande et la Chine dans un cadre postkeynésien. Dans ce but un modèle est proposé etses paramètres sont estimés pour caractériser les régimes de croissance de demande dansces pays. L’analyse économétrique montre que les demandes domestiques de ces payssont tirées par les salaires, sauf Thaïlande dans lequel certaines mesures de la répartitiondes revenus indiquent que l’économie domestique est tirée par les profits, pendant que leséconomies ouvertes sont tirées par les profits. Les résultats décrivent que des politiquesde croissance pro-travaillistes ne sont pas viables au court terme dans ces pays. Cettethèse comprend une revue de la littérature sur les théories de répartition des revenus et decroissance, présente une revue de la littérature sur les travaux empiriques de modèlespostkeynésiennes de croissance et répartition, expose un modèle théorique, elle comprendégalement une analyse du régime de croissance de demande en Corée du Sud, Thaïlandeet la Chine, respectivement. Dernièrement, la thèse discute les défauts du modèle, résumeses résultats et arrive à des conclusions politiques impliquées par le modèle. / The aim of this PhD dissertation is to analyze the short-term impact offunctional income distribution on aggregate demand and its components in South Korea,Thailand, and China within a post-Keynesian framework. For this purpose, thedissertation proposes a theoretical model, and estimates its parameters for characterizingdemand regimes in these countries. Econometric analysis shows that domestic economiesof the countries are wage-led except for Thailand, in which some measures of incomedistribution point to a profit-led domestic demand regime, while total economies areprofit-led. The results indicate that pro-labor growth policies are not viable in the shortrun in these countries. The dissertation reviews the theories of income distribution andgrowth, offers a survey of the empirical literature on the post-Keynesian models ofincome distribution and growth, presents the theoretical model proposed, and undertakesan analysis of demand regimes in South Korea, Thailand, and China. Finally, thedissertation addresses the shortcomings of the model, summarizes its findings discussesthe implied policy conclusions.

Esta tesis analiza temas de distribución de la renta y desarrollo económico en economías caracterizadas por imperfecciones en el mercado de capitales.El primer capitulo estudia temas de distribución de la renta. La mayoría de la literatura en ese campo a sido desarrollada bajo el supuesto que IMC (esto es imperfecciones en el mercado de capitales) son exógenas. La teoría convencional es que es muy poco probable que los individuos mas pobres puedan invertir porque tomar dinero a préstamo es muy caro en presencia de asimetrías informativas. Consecuentemente, los individuos más pobres no invertirán y sus futuras generaciones permanecerán pobres. Basado en esta línea de pensamiento esta literatura concluye que IMC exógenas producen mayor desigualdad y menor movilidad intergeneracional. Contrariamente as estos análisis este artículo argumenta que cuando las IMC se endogenizan la movilidad intergeneracional aumentará entre los pobres e inteligentes individuos. En mi modelo existe un problema de selección adversa entre el prestamista y el prestatario, pues los bancos no saben la habilidad del prestatario. En este contexto los bancos ofrecen un menú de contratos que satisface la condición de auto-selección. En equilibrio bancos diferencian entre agentes forzando a los más inteligentes a invertir en educación más de lo óptimo. De esta forma el agente menos inteligente no se hace pasar por el agente más inteligente. Estos últimos obtienen más educación de la que ellos desean, aumentando movilidad intergeneracional y la acumulación de capital humano, que son mayores que en el mundo con información perfecta.Los resultados más importantes de este paper son los siguientes: cuando se endogenizan las imperfecciones del mercado de capitales obtenemos que IMC aumentan movilidad intergeneracional y aumenta el número de gente educados en el estado estacionario. Al estudiar desigualdad en renta, yo encuentro que los resultados son ambiguos. Por un lado el número de gente con rentas muy bajas ha disminuido. Por otro lado la clase media de prestatarios inteligentes tienen una renta menor.Una de las cuestiones más importantes que se hacen los economistas es porqué países pobres usan sus recursos de forma ineficiente. En el segundo capítulo nosotros (Andrés Erosa y yo) proponemos una teoría donde IMC son el origen de las diferencias en TFP entre países. En nuestra teoría los empresarios tienen información privada sobre la productividad de su tecnología. Nosotros estudiamos cómo el contrato, descrito como la habilidad de hacer respetar el contrato, afecta la provisión de incentivos, y por tanto, y de repartir los recursos entre los empresarios. Nosotros estudiamos un modelo de crecimiento donde los empresarios están dotados de una tecnología para producir un bien intermedio que es el input de la producción final de bienes. Los empresarios necesitan financiación externa para producir. Esta financiación externa está limitada por dos problemas: Primero, la productividad no es observable para los prestamistas. Segundo, los empresarios pueden pagar, como máximo, una fracción de la producción. Asumimos que los países difieren en su capacidad de hacer respetar los contratos. Demostramos que, en la presencia de asimetrías de información, países con baja capacidad de hacer respetar los contratos utilizan tecnologías ineficientes en equilibrio y es caracterizada por diferencias en productividad entre países. Nuestra teoría sugiere que los empresarios tienen intereses en mantener en status quo con baja capacidad de hacer cumplir los contratos y esto hace posible que los empresarios extraigan rentas de los servicios que contratan. Nuestra teoría tiene implicaciones sobre la distribución de los recursos entre sectores. En fin nuestra teoría implica que la tasa de impuestos sobre la renta puede ser mala para la actividad económica sobre todo cuando los mercados de capitales son imperfectos. / This dissertation analyzes income distribution and economic development issues in macroeconomies with financial frictions. Chapter 1 focuses on income distribution issues. Most of the existing literature in this area has been developed under the assumption that CMI are exogenous. Their conventional view is that since becoming borrower is expensive under high imperfections in the capital markets, poor agents are less likely to make investment decisions. As a consequence their future generations will remain poor. Based on this thought these branch of the literature conclude that exogenous CMI lead to higher inequality and lower mobility. In contrast to these analyses this paper argues that when we endogenize CMI, intergenerational mobility may be promoted among poor and talented agents. In my model there is an adverse selection problem between borrowers and banks, since banks cannot identify borrowers' ability. In this context banks offer a menu of contracts that satisfy the self-selection mechanism. In equilibrium banks differentiate between agents by forcing talented borrowers to make an investment in human capital larger than they would in the first best world. In this way low ability individuals do not pose as high ability ones. Talented children from poor families get educated even more than they wish, so that both income mobility and human capital accumulation are larger than in the first best world. The major results of this paper might be summarized as follows: when we endogenize imperfections in the capital market we obtain that CMI promotes intergenerational mobility and increases the number of educated people in the steady state. When we study inequality of wealth, we find that there are opposite effects making inequality unambiguos. On the one hand there is a small number of people in the lower bound of the wealth distribution. On the other hand the middle class of clever borrowers have a lower wealth. One of the most important research questions faced by economist is why poor countries use productive resources inefficiently. In the second chapter of the thesis we propose a theory where capital market imperfections are at the origin of cross-country TFP differences. In our theory entrepreneurs have private information about the multifactor productivity of their technology. We study how the contracting environment, as described by the ability to enforce contracts, affects the provision of incentives and, thus, resource allocation to and across entrepreneurs. We develop a growth model where entrepreneurs are endowed with a technology to produce an intermediate good that is an input in the production of final goods. Entrepreneurs need external funds in order to operate their technology. External financing is complicated by two problems: First, the productivity of the entrepreneurial technology can not be observed by lenders. Second, entrepreneurs can commit to pay, at most, a fraction of the output. We assume that countries differ in the ability to enforce loans contracts. We show that, in the presence of asymmetric information, countries with low enforcement use inefficient technologies in equilibrium and are characterized by differences in productivity across industries. Our theory also suggests that entrepreneurs have a vested interest in maintaining a status quo with low enforcement since it allows them to extract rents from the factor services they hire. Our theory has implications for the allocation of resources across industries that differ in their needs of external funds and provide some insights into why poor countries face large differences in productivity across sectors. Our theory also implies that income taxation can be more detrimental for economic activity when capital markets are imperfect.

This paper tests the relationship between income inequality and trade flows. The model is based upon Helena Bohman and Désirée Nilsson (2007) and Mitra Trindade and Dalgin (2008). This paper will set up gravity model for 50 countries which includes, income distribution, population, average individual income level and GINI variable as distribution of disposable income as an explanatory variables. Results confirm that when income inequality increases in the exporting country, export of necessities increase and export of luxuries decrease. Income distribution also shows expected effect on trade flows in the importing country. When income inequality increases in the importing country, import of necessities decrease and import of luxuries increase.