Do Economic Complexity and Strong Institutions Affect Income Inequality

Abstract

This study investigates the relationship of a country's sophisticated products and institutional indicators on income inequality. Cross-country OLS and fixed-effects estimate regression analysis show that countries with productive economic structures have less inequality. Meanwhile, three government indicators in accountability, political stability, and the rule of law show mixed results. Using the system generalized method of moments (GMM) to control endogeneity, we find evidence of a causal link from economic complexity to income inequality in the short run. Meanwhile, the government's political stability is not a significant predictor.Studi ini bertujuan untuk mennginvestigasi hubungan antara produk dengan kompleksitas tinggi dan indikator institutional pada income inequality. Analisis regresi cross-country OLS dan fixed-effects menunjukkan negara dengan struktur ekonomi produktif memiliki kesenjangan yang rendah. Sementara itu, tiga indicator pemerintahan dalam akuntabilitas, stabilitas politik, dan the rule of law menunjukkan hasil beragam. Kami menggunakan system GMM untuk memecahkan masalah endogeneitas. Kami menemukan bukti hubungan kasualitas dari economic complexity dengan income inequality dalam jangka pendek. Di sisi lain, stabilitas politik bukan indikator yang signifikan.