The finance-inequality nexus is central to understanding cross-country income disparities, yet the evidence on whether financial development raises or lowers inequality remains mixed. This paper asks whether economic literacy, a population’s capacity to understand and use financial services, conditions that relationship. Using a panel of forty-eight countries over the 1995–2008 period and System GMM estimation that addresses the endogeneity of financial development, we find that financial development is positively associated with income inequality, but that this effect is significantly mitigated where economic literacy is higher. At low levels of economic literacy, financial development increases inequality; as literacy rises, the effect weakens, and at sufficiently high levels, it may become negligible. The moderating effect is negative and significant under two independently constructed measures of economic literacy: a survey-based index and an objective metric. It therefore does not depend on how literacy is measured. The result also holds under an alternative measure of financial development, a reduced instrument set, and controls for institutional quality. The findings identify economic literacy as a complement to financial development through which the distributional gains from finance can be more widely shared.

This paper develops a unified framework combining corrected National Accounts, dynamic social tables, and capital-income allocation to reconstruct long-run inequality, allowing the calculation of overall inequality, labor inequality, and extended-income inequality. The evidence indicates a decline in overall inequality alongside a contrasting rise in labor inequality from the late 1950s to 1970. However, oil-price shocks after 1973 had distributionally asymmetric and non-linear effects on overall inequality, whereas labor inequality exhibits a sign-dependent response. Furthermore, in-kind transfers in education and health substantially lowered overall inequality. Nevertheless, oil wealth did not function as a sustained equalizing force; post-1970s rent volatility, institutional weaknesses, and labor-market fragmentation reinforced a distributional regime in which gains concentrated at the top during booms while losses were widely shared during slumps. The Venezuelan case illustrates how reliance on publicly owned natural resources, absent strong institutions and policies, can evolve into a persistent growth and distributional failure.

This paper develops an endogenous growth model featuring income-dependent risk preferences to explain the emergence and evolution of buyout funds. We propose a novel preference structure where high-income agents derive utility from the thrill of entrepreneurial risk-taking, leading them to acquire business ideas from capital-constrained innovators. The model demonstrates that buyout funds emerge as equilibrium contracts when income inequality exceeds a critical threshold, with wealthy investors paying premiums to participate in ventures. Conversely, in more equal economies, buyout funds serve as transitional institutions. Initial inequality enables the acquisition of ideas, but subsequent growth allows the original idea holders to become independent entrepreneurs, leading to the fund’s eventual decline. Our framework provides microfoundations for understanding how income distribution shapes financial intermediation patterns and their growth consequences, offering new insights into the relationship between inequality, entrepreneurial spawning, and innovation-driven growth.

This paper explores the dynamic effects of labor unions on economic growth and income inequality in a Schumpeterian growth model with heterogeneous households and endogenous market structure. Income inequality arises from an unequal distribution of wealth and heterogeneous labor productivity. In the short run, increasing union bargaining power reduces both growth and inequality when the union is wage-oriented. In the long run, stronger unions continue to lower inequality without affecting the steady-state growth rate. The model identifies the channels through which unions shape inequality: an income-share shift from asset income to labor income, wage compression, and changes in the wealth-wage correlation. Calibrating the model to U.S. data, we find that increasing union bargaining power significantly reduces long-run income inequality.

The role of different forms of inequality in Populist Radical Right (PRR) voting, such as income and health inequalities, is not examined consistently. Therefore we conducted a scoping review aiming to examine whether and why income and health inequalities are associated with PRR voting in Europe. We systematically searched Web of Science, Scopus and ScienceDirect for publications between 2015 and 2024. Eleven studies were ultimately included in our review. Data were extracted and analysed qualitatively. We identified seven studies that support an association between income inequality in PRR voting, while two studies did not find evidence for this relationship. Although no studies examined the role of health inequalities, we found two studies that suggest a role for welfare policies and life dissatisfaction. The overall results offer a more comprehensive understanding of how income inequality is related to PRR voting, highlighting perceived risks of economic, social or cultural loss. Our findings tie theories on social hierarchies to theories on PRR voting. While social hierarchies can lead to health problems related to anxiety and stress, more research is needed to analyse whether and how pre-existing health inequalities contribute to the rise of social hierarchies, institutional distrust and PRR voting.

We develop a health demand model informed by Grossman's theoretical framework, examining how air pollution governance (APG) affects health and income inequality. Analysis of the China Health and Nutrition Survey data reveals that APG has markedly enhanced the health status of local residents, consequently mitigating regional income inequality. For every doubling of air pollution control, the likelihood of residents falling ill diminishes by 40.3 per cent; in contrast to regions with inadequate APG, the income inequality coefficient in regions with robust APG declines by approximately 6.2 per cent. An in-depth examination of the welfare implications of APG, both theoretically and empirically, reveals that such governance enhances the ‘production possibility frontier’ for the population, thereby augmenting individual utility.

Previous scholarship suggests that rising inequality in democracies suppresses trust in institutions. However, the mechanism behind this has not clearly been identified. This paper investigates the proposition that income inequality leads to increased democratic distrust by depressing perceptions of external efficacy. Based on time‐series cross‐sectional survey data from the European Social Survey, we find that changes in income inequality have a negative effect on changes in political trust and external efficacy. Causal mediation analysis confirms that inequality affects trust through lower efficacy. Further analyses show that this efficacy‐based mechanism does not depend on political orientation. As a direct effect remains among left‐wing respondents, our empirical results indicate that inequality affects trust via both a mechanism of substantive output evaluation and a process‐based evaluation that measures of external efficacy can capture. These findings highlight the empirical and theoretical relevance of this so far neglected mechanism and provide a potential solution for the puzzle that inequality depresses trust also among those for whom inequality is not politically salient.

Stagnating incomes have been a widespread concern in advanced democracies over the past decades. However, despite a turn towards dynamic frameworks, the consequences of stagnation on political support for the welfare state are still unclear. This study introduces the distinction between ‘absolute’ and ‘relative’ income stagnation – that is, experiencing stagnating incomes over time (without reference to other groups) and in relative comparison to other groups – and explores how they shape citizens’ attitudes towards redistribution. I argue that absolute and relative stagnation have opposite effects on redistributive preferences. Contrary to political economy theories, I expect that low absolute income growth reduces demand for redistribution, because it reduces voters’ ability and willingness to afford welfare state policies. Support for this hypothesis is provided in an empirical analysis that combines novel estimates for absolute and relative income stagnation with longitudinal survey data on redistribution preferences in 14 advanced democracies between 1985 and 2018. The distinction between absolute and relative experiences has broader implications for comparative politics research and might contribute to explain why income stagnation and rising inequality have not led to higher political demand for redistributive welfare policy.

This article examines support for radical left ideologies in 32 European countries. It thus extends the relatively scant empirical research available in this field. The hypotheses tested are derived mainly from group‐interest theory. Data are deployed from the 2002–2010 European Social Surveys (N = 174,868), supplemented by characteristics at the country level. The results show that, also in the new millennium, unemployed people and those with a lower income are more likely to support a radical left ideology. This is only partly explained by their stronger opinion that governments should take measures to reduce income differences. In contrast to expectations, the findings show that greater income inequality within a country is associated with reduced likelihood of an individual supporting a radical left ideology. Furthermore, cross‐national differences in the likelihood of supporting the radical left are strongly associated with whether a country has a legacy of an authoritarian regime.

This study analyses why income inequality and party polarisation proceed together in some countries but not in others. By focusing on the relationship between income inequality, the permissiveness of electoral systems and party polarisation, the study offers a theoretical explanation for how the combination of income inequality and permissive electoral systems generates higher party polarisation. After analysing a cross‐national dataset of party polarisation, income inequality and electoral institutions covering 24 advanced democracies between 1960 and 2011, it is found that a simple correlation between income inequality and party polarisation is not strong. However, the empirical results indicate that greater income inequality under permissive electoral systems contributes to growing party polarisation, which suggests that parties only have diverging ideological platforms due to greater income inequality when electoral systems encourage their moves towards the extreme; parties do not diverge when electoral systems discourage their moves towards the extreme.

This study provides a novel contribution to the democracy–inequality literature by presenting the belief in democratic redistribution (the view that redistribution is an essential characteristic of democracy) as a conditioning factor. Democracy is expected to reduce inequality when people perceive redistribution as an essential characteristic of it, yet initial analysis shows contrasting results depending on the operationalisation of the indicator. Subsequent findings show, perhaps surprisingly, that democracy is only correlated with lower inequality when more people regard elections and liberties, instead of redistribution, as the essential characteristics of democracy. Democracy is associated with higher inequality when a larger share of the population considers redistribution to be essential to it. It is suggested that in response to the utilitarian view of democracy, authoritarian leaders can gain legitimacy by reducing inequality, whereas elected leaders in a democracy can hold power with little action on redistribution.

Wilkinson and Pickett, in their 2009 book The Spirit Level, found that, in rich countries, income inequality was negatively associated with a range of indicators of well-being, but they did not consider the relationship with volunteering. This paper seeks to fill that gap. Using existing data sources, it shows that, among European countries, higher levels of volunteering are associated with lower levels of income inequality. The relationship is particularly strong for regular and sport-related volunteering. The basic Spirit Level thesis is therefore confirmed as applicable to volunteering. However, while the thesis involves just one theoretical explanation for the income inequality/well-being relationship, namely status anxiety, in the case of volunteering, other variables are also found to be at play, including government social spending, available leisure time and geo-historical traditions. It is concluded that, while high levels of volunteering, as a form of social capital, can be seen as one of a number of features of more equal societies, disentangling cause and effect may require a more holistic approach to understanding its contribution to the generation and sustaining of social well-being.

Unlike existing studies on labour and income in the digital era, this paper argues not only that the impact of the digital economy’s intervention in the labour process is fragmented rather than comprehensive, but also that the transformation of job demand and labour supply behaviours is simultaneous and related to the attributes of the industries in which they operate. Drawing on the conventional biased technological progress hypothesis and labour process theory, we argue that the digital economy has generally increased the labour income inequality for migrant workers in China. Using geospatially matched China Labour Dynamics Survey 2018 microdata and provincial digitalisation indices, we uncover a digital ‘upgrading trap’: the development of the digital economy hides the process of inequality formation in the hedging relationship between objective labour demand ‘upgrading’ and subjective labour supply ‘expanding’. The former can be summarised as the risk of ‘no job’ and the latter as the risk of ‘no way back’. Counterintuitively, consumer Internet development demonstrates a greater role in both reducing workers’ inequality in secondary labour markets and promoting a fair primary distribution. These findings reconceptualise digital inequality as coevolutionary outcomes, and offer a tripartite governance way for inclusive growth through portable skill certification, algorithmic accountability mechanisms, and interoperable social security systems.

Legitimizing property rights over the resources that participants use in dictator and ultimatum games has been shown to significantly alter behavior. However, a similar impact has not been observed in public good experiments. We employ an interior public good design with thirty periods of peer punishment, which allows groups to choose between plausible contribution norms without conflicting with efficiency. Across our Unearned and Earned treatments, endowments are randomly allocated or earned through a real effort task. In Unearned, both High and Low types adhere to a norm of contributing an equal proportion of one’s endowment. In contrast, in Earned, only Low types adhere to the proportional contribution norm, while High types contribute less than an equal proportion. Notably, deviations from the proportional contribution by High types are punished significantly less in Earned, suggesting a greater tolerance to such deviations when property rights are earned.

We introduce a banking sector and heterogeneous agents in the dynamic overlapping generations model of Matsuyama et al. (2016). Our model captures the benefits and costs of an advanced banking system. While it allocates resources to productive activities, it can also hinder progress if it invests in projects that do not contribute to capital formation, and potentially triggering instabilities due to the emergence of cycles. Our intergenerational dynamic framework enables us to show that income inequality between agents increases during recessions, confirming empirical observations. Moreover, we identify both changes in production factor prices and the reallocation of agents across occupations as driving factors behind the increased inequality.

Comparative research documents substantial education- and income-based class gaps in parent spending on children’s education, with important repercussions for the perpetuation of intergenerational (dis)advantage. Spurred by higher levels of income inequality and associated economic transformations, some speculate these gaps may have widened, as parents feel intensified pressure to best position their children in increasingly competitive labour markets. We examine the size and evolution—over time and in response to higher inequality—of these class gaps in the Canadian provinces, a context where we propose competitive pressures may be muted by the country’s relatively unstratified post-secondary education system. Exploiting provincial and temporal variation in Statistics Canada’s Survey of Household Spending (2006–2019), we show that more highly educated parents, and to a lesser extent high-income ones, place distinct emphasis on education spending. However, we find limited evidence of changes in these spending patterns in response to income inequality or over time.