EXPLAINING INTERNATIONAL AND INTERTEMPORAL VARIATIONS IN INCOME INEQUALITY

This paper explores the propositions that, income inequality is relati vely stable within countries; and that it varies significantly among c ountries. A new and expanded data set provides broad support for both propositions. Drawing on a political economy and capital market imperf ection arguments to explain the intertemporal and international variat ion in inequality, the empirical analysis shows that the predicted var iables associated with the first argument (a measure of civil libertie s and the initial level of secondary schooling) and the second argumen t (a measure of financial depth and the initial distribution of land) are indeed important determinants of inequality.