The Impacts of Institutional Quality, Macroeconomics Variables and Education on Income Inequality in Developed and Developing Countries

Lim, Hui Shan (2024) The Impacts of Institutional Quality, Macroeconomics Variables and Education on Income Inequality in Developed and Developing Countries. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study explores the impact of inflation, unemployment, female to male labour participation ratio, tertiary education enrollment, gross domestic product per capita, political stability and absence of violence/terrorism, regulatory quality and control of corruption to income inequality. on income inequality across developed and developing countries. It employs OLS regression analysis, including tests for heteroscedasticity and joint significance. Surprisingly, models incorporating a "Developed" dummy variable and its interactions fail to explain income inequality effectively. However, models integrating religious factors, such as Muslim and Christian dummies and their interactions, demonstrate significant explanatory power for income inequality. This suggests that using religion as a classification indicator may be more appropriate than development status for understanding income inequality among countries. Some policy recommendations to ease income inequality are female employment policy, expansionary fiscal policy and governance policy.