Impact of population cycle on income sharing pattern of a capitalistic society

Abstract

In this paper, we have tried to explore how the fundamental structure of a capitalistic society affects income sharing within the society and widens the vertical disparity in income distribution. We argue that a capitalist in a free market uses various elements of an economy to continuously improve their profitability. Initial rising population is used as a tool to enhance profit and once the population starts declining, international trade is used as a substitute for population growth to further enhance their profit. Our empirical analysis was divided into two parts;(i) the correlation between income inequality (Gini coefficient) and population (total population & population growth rate) was investigated for closed economies namely Brazil, Moldova, Morocco, & Ukraine (ii) a multivariate OLS was run with Gini coefficient as the dependent variable while the ratio of CPI (Consumer Price Index) and Wage Rate, Export as a percentage of GDP (Gross Domestic Product), and population growth rate was used as regressors to understand how income sharing evolves in an open economy and subject of the study was U.S. The result was confirmatory to the theoretical framework and alternative hypothesis represented in the paper that income inequality is positively associated with population for a closed economy while two variables negatively correlated for an open economy. Further, a positive association was found between income inequality and the ratio of CPI and Wage Rate, and Export for an open economy.

Keywords

• income inequality
• inflation
• wage rate
• international trade
• population