SAJMS - South Asian Journal of Management Sciences

Sectoral Output and Income Inequality Nexus in G7 Countries: A Panel ARDL Approach

The sectoral output and income inequality nexus has attracted the attention of economists in recent years. The present study contributes to the existing literature on the sectoral output and income inequality nexus in G7 economies. To serve this purpose, the study uses panel autoregressive distributed lag (PARDL) methodology. The PARDL methodology suggests the long-run and short-run relationship among all variables except the inflation rate. The positive impact of the industrial sector on income inequality outweighs the negative impact of the agriculture and service sectors. The impact of sectoral per capita output on income inequality is different from the overall per capita output suggested by Wald test statistics. However, industrialization is a catalytic factor causing income inequality in highly developed countries. The study suggests different interventions at sector level(s) for G7 countries to make income distribution more equal.

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