Assessing the degree of inequality in the distribution of national income and its macroeconomic consequences in Azerbaijan

Abstract

The article examines the level of inequality of income distribution using the Gini, Atkinson and Theil indices over the past 8 years. It was taken household income as research data. The authors came to the conclusion that household incomes in Azerbaijan are very different, and inequalities in their incomes are very high. With the increase in average and of all strata of households incomes, inequalities between them did not noticeably decrease. The article also explores some macroeconomic effects of household income inequality.The analysis shows that the level of economic development of Azerbaijan and country's revenues from the oil sector, along with an increase in the average income among the population, have significantly increased inequality. The facts are substantiated that the level of household income distribution does not characterize the level of economic development. The dependence of the level of inequality of household incomes on the level of state intervention in the economy through fiscal policy, the interrelation of income inequality to economic growth in the country, the impact of the level of inequality in the distribution of national income on the effectiveness of fiscal policy were evaluated. As a quantitative assessment of fiscal policy, the level of public finance was used - a composite index of the state budget and tax burden. To compare the levels of income inequality were used Gini, Atkinson and Theil indexes.The authors came to the conclusion that a high level of income inequality is associated primarily with a high level of wage inequality in various spheres of economic activity and the liberality of fiscal policy. The authors proposed a model for determining the dependence of the volume of GDP or GDP per capita on the volume of public expenditures, the Gini index, and the sub-index of government finances. A model has also been proposed for determining the interrelation between fiscal policy, the Gini index, industrial output and population size. Analyzes show that hypothesis is correct for determining the dependence of the volume of GDP on the Gini index and the sub-index of public finance. The authors also came to the following conclusions: the level of inequality of household incomes in Azerbaijan is very high in various methods, and the role of fiscal policy in the redistribution of income is not high.