Cross-national variation in income inequality and its determinants: An application of Bayesian model averaging on a new standardized inequality data set

Abstract

A new good quality standardized data set for cross-national comparisons of income inequality covering 147 countries has been constructed. The Bayesian model averaging and multiple imputation approach have been used to identify robust correlates from a larger pool of potential predictors of cross-national variation in inequality determined from previous literature. The results document significant macro-regional specificity both regarding levels and predictors of inequality. While globalization associates with lower inequality in Western countries, it has opposite effects in Latin America, Sub-Saharan Africa or post-communist countries. Age structure, the extent of social spending, or colonial history are another important factors with regionally specific impacts on inequality. By contrast, explanative power of some other traditional determinants of inequality has not been corroborated.