On income inequality and population size

TL;DR

This paper introduces a theoretical concept of targeted income inequality based on population size and empirically analyzes its relationship using global data, providing policy guidance for achieving optimal inequality levels.

Contribution

It is the first to propose a theoretical framework linking income inequality to population size and empirically tests this relationship across multiple countries.

Findings

The relationship between Gini coefficient and population size is nonlinear.

Most countries deviate from their targeted income inequality levels.

Results can guide policymakers in designing inequality-targeted policies.

Abstract

The pursuit of having an appropriate level of income inequality should be viewed as one of the biggest challenges facing academic scholars as well as policy makers. Unfortunately, research on this issue is currently lacking. This study is the first to introduce the theoretical concept of targeted level of income inequality for a given size of population. By employing the World Bank's data on population size and Gini coefficient from sixty-nine countries in 2012, this study finds that the relationship between Gini coefficient and natural logarithm of population size is nonlinear in the form of a second-degree polynomial function. The estimated results using regression analysis show that the majority of countries in the sample have Gini coefficients either too high or too low compared to their appropriate values. These findings could be used as a guideline for policy makers before designing and implementing public policies in order to achieve the targeted level of income inequality.