Evaluation of the factors affecting income inequality in OECD countries with panel data analysis

In recent years, the increase in global trade and cooperation has been brought a different dimension to the economy. Accordingly, the convergence of per capita income among countries has led to a revival of interest in income distribution. At this point, it is of a great importance to investigate whether the income distribution among the rich and the poor converges or diverges to absolute equality in the long run. Therefore, it is necessary to examine how the factors determining income distribution affect the income difference between the two groups. In this study, using the data of 25 countries for the years 2001-2020, the factors causing income inequality were analyzed first statistically and tehn econometrically. Panel data analysis was performed considering that the data included cross-sectional dependency and was heterogeneous. The stationarity of the series was examined with the Pesaran 2007 CIPS Panel Unit Root Test, which is one of the second generation unit root tests. While the panel cointegration relationship was analyzed with the Westerlund Panel Cointegration test, for the cointegration coefficients analysis was used the Panel AMG (Augmented Mean Gorup) method that developed by Eberhardt and Bond. Finally, in order to analysis the causality between the variables applied Dumitrescu-Hurlin Panel Causality Test. As a result of the analysis, it seen that an increase in the consumer price index increases income inequality by 0,01. It has been determined that a one unit in the indirect taxes, in the human development index, in the political stability and absence of violance/terrorism index reduces income inequality by 0.08, 19.3 and 0.04 respectively.