Title: Income inequality and agglomeration economies: a case of a developing economy
Authors: Asim Iqbal; Mohammad Hassaan; Haider Mahmood
Department of Accounting, College of Business Administration, Prince Sattam bin Abdulaziz University, Hotat Bani Tamim, Kingdom of Saudi Arabia; Department of Economics, Faculty of Arts and Social Sciences, University of Central Punjab, Lahore, Pakistan
Department of Economics, Faculty of Arts and Social Sciences, University of Central Punjab, Lahore, Pakistan
Department of Finance, College of Business Administration, Prince Sattam bin Abdulaziz University, Al-Kharj, Kingdom of Saudi Arabia
Abstract: The concentration of population generates spillover effects and one would expect the upsurge of business and economic activities in that particular area which also affects income distribution in the society. This paper is intended to elucidate income inequality in the context of agglomeration economies in a developing economy like Pakistan during 1980-2014. The study period is hallmarked by the major shocks across the world economies including Pakistan. Therefore, the study incorporates structural break both during the pretesting of time series properties and in cointegration tests. The bounds testing for the long-run cointegration reveals that the under investigating variables are cointegrated. We further find that the Kuznets inverted-U hypothesis does not hold in Pakistan. Moreover, the agglomeration economies negatively and linearly affect income inequality. This study suggests that the concentration of business activities in the less agglomerated areas is helpful in reducing income inequality.
Keywords: income distribution; agglomeration; unemployment; per capita income; time series; structural breaks; ARDL cointegration; developing economy; Pakistan.
Int. J. of Economics and Business Research, 2018 Vol.15, No.2, pp.257 - 271
Submission date: 13 Dec 2016
Date of acceptance: 04 Feb 2017
Available online: 12 Jan 2018