This study examines the relationship between income inequality and economic freedom by using two concepts developed in institutional economics, namely “extractive and inclusive institutions”. We argue that income inequality might be high both in countries with extractive institutions, where the level of economic freedom is low, and in countries with inclusive institutions, where the level of economic freedom is high. We propose a U-shaped relationship between income inequality and economic freedom. We use a panel data set containing 1425 country-year observations from 137 countries for the years from 2000 to 2018 to test our proposition. The results confirm our expectation that the relationship between income inequality and economic freedom is negative at low levels of economic freedom, but positive at high levels of economic freedom.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.