Topic: How does Income Inequality affect Human development?
Introduction
Why have you selected this topic? Why is it important? What is the motivation and meaningfulness in investigating this topic? What do you hope to see?
Income inequality is a controversial and popular topic that has been accessed for decades. It assesses how evenly income is spread among a population. This paper intends to take a different but similar approach to look at the effect of income inequality on human development by analyzing panel data with multiple linear regression.
Initial hypothesis: Higher levels of income inequality has a negative effect on human development and could be due to mismanagement of resources which come at the cost of not only the individual but the overall economy. However, it could be different for the different dimensions of the HDI and development.
How can we improve human development to reduce/minimize the level of income inequality thus improving the overall economy of countries?
Literature Review
What have others said about this topic? Compare and contrast.
There’s a lot of research that examines income inequality on a range of other factors which include economic growth, education levels, public health etc. However, this paper will take a relatively new direction by looking at the effect of income inequality on the composite of the three indicators on human development
However, it will be important to look into the literature of other factors to compare and contrast because they are all important issues that broaden income inequality thus affecting human development.
Empirical model?
Y=β0 + β1X1 + β2X2 + β3X3 + e
HDI= β0 + β1Gini + β2Education + β3Health + error term
Why are you choosing these indicators and explaining them briefly? (that includes both the dependent and independent variables)
Also, how are you going to measure the variables and where are you getting your data from?
Dependent variables:
Human Development Index (HDI) – data from UNDP
HDI is a measurement of three dimensions: health, education, and standard of living. It yields a value ranging from zero to one with higher indices indicating a stronger level of human development. (by comparing those with high, in between and low levels of human development)
Independent variables:
Gini Coefficient (a measure of inequality) – Data from the world bank
Primary explanatory variable selected. The Gini coefficient is a measure of income distribution and represents income inequality; it ranges from 0 to 100.
A value of 0 represents a perfect distribution of incomes per household and a value of 100 represents perfect inequality.
Additional explanatory variables are added to support the model and strengthen the goodness of fit. It will help highlight the ceteris paribus of income inequality on Human Development from the GINI coefficient and HDI respectively.
Education (data from world bank)
This will be measured by government expenditure on education, (% GDP). Accessing this will give an analysis into how much the government put into education relative to other issues.
Health (Data from World bank)
Measured by current health expenditure (% of GDP). This indicates resources that are channelled to health relative to other issues. This analyzes and prioritizes the importance of health in the economy.
Error term (e)
Takes into consideration all other variables that have not been included in the model.
Data/classification of countries
Data will be collected to capture the world between the period 1990-2019. Estimating a longer period may help with gathering sufficient data and strengthen the analysis.
(Important: Data to be obtained from both the world bank and UNDP)
When looking at the World Bank, the human development index is not included, its human capital index. Is it the same?
Explain the classification of countries by the world bank i.e. (How does the world bank explain these countries)
The World Bank assigns the world economies into 4 income groups. These are based on the GNI per capita in the current USD of the previous year. These figures are as of 2018.
Low-income countries: Countries with a gross national income (GNI) per capita of $1,025 or less in 2018 are considered low-income
low middle-income countries have a GNI per capita between $1,026 and $3,995.
Upper-middle-income countries: have GNI per capita between $3,996 and $12,375
high-income countries have a GNI per capita of $12,376 or more.
Conclusion:
Overall summary of results – do they agree with your hypothesis and if not so much why?
How do we tackle this– ways forwards or potential remedies (policy interventions) to improve?
