Exploring the influence of financial development, trade, and urbanization on income inequality: A regression-based decomposition analysis with macro -level insights

Abstract

Throughout the past two decades, Asia’s economic growth, fueled by advancements in finance, international trade, urbanization, and shifting demographics, has profoundly shaped income inequality. The study explores these connections from 2000 to 2023. Using advanced econometric techniques, including advanced regression methods, conventional GMM, and quantile regression, the study analyzes how these factors affect income disparities. The degree of income inequality is notably influenced by financial development and trade, along with urbanization, with regional and income disparities playing a moderating role. The research explores the moderating effects associated with financial development and trade, revealing important macroeconomic dynamics. To ensure the reliability of the results, the research addresses endogeneity issues, removes outliers, and uses mean value imputation for missing data. This detailed analysis deepens insights into income inequality dynamics in Asia, emphasizing the necessity for customized policy interventions to address inequities and foster inclusive economic advancement