Long-term and short-term effects of economic and financial risk on income distribution: PANEL ARDL approach

Several factors affect the distribution of income in a society. One of these factors is risks such as economic and financial risk. Therefore, the purpose of this study is to investigate the effect of economic and financial risks on income distribution in D8 countries. PANEL ARDL method during 2010-2020 is used to estimate the model. The estimation results of the model have shown that both financial and economic risks have a negative and significant effect on the Gini coefficient in the short term and in the long term. This means that with the increase in the level of risk and instability in countries, the distribution of income in them worsens and a greater income gap is created. Also, the variables of GDP per capita and trade openness index also had a positive effect on the Gini coefficient of countries. In other words, the growth of per capita GDP and the openness of the economy have created more income opportunities for the rich groups and the income gap has increased. The government expenditure had a negative and significant effect on the Gini coefficient. In this way, it can be said that the financial policies of the government in these countries have been in line with the equal distribution of income.