Equality and Income: Can Income Distribution Affect Country Income by Affects Competitiveness?

This study argues that income distribution may cause country income. For the purpose of prove this argument a model established that suggests a positive relationship between income equality and the competitiveness of the country. Hypothesis tested to cover 42 countries and 2007-2018 with panel data analysis. Econometric analysis results support the study. According to these results, GCI value decreases as GINI value increases. In other words, as the income distribution becomes unequal, the competitiveness of the country decreases. In this context, the study is an important source in explaining the effect of income distribution on income.


Introduction
Relationship between income inequality and economic growth largely is discussed issue. Income distribution and economic growth theories can be least David Ricardo (1817). In the Ricardian Theory analyses functional income distribution with increases agricultural product. Modern economic growth and income distribution theories start with Simon Kuznets (1955). Communities those theories are causality structure between income inequality and economic growth. Those theories were made income inequality as a dependent variable. But studies in recent decades asked that question; "may income distribution can effect economic growth?". There are four different answer of this question. 1-income equality negative effects on economic growth (Welch, 1999, s. 2), 2-income equality positive effects on economic growth (Brown & Pickett, 2017, ss. 24, 25), 3-equality doesn't affect economic growth (Banerjee & Duflo, 2003, s. 267;Günther Rehme, 2007, s. 507). And 4-some research suggests both fully income equality and inequality creates same negative effects on economy (Murphy vd., 1989, s. 553).
This study clearly defends income equality for increasing economic growth. Similar studies making the same suggestion in literature addressed economic growth within the framework of sustainability. The causality relationship between equality and economic growth in these studies established by linking the elements that provide educational and cultural progress.
But Daşdemir (2018) in Turkic literature shows that income distribution can effects economic growth by the effects competitiveness. According to this income distribution effects competitiveness of country by putting the consumption structure into a more similar structure. When consumption of individuals more similar shown these result increase competitiveness listed below (Daşdemiṙ, 2018, ss. 467, 468);

1)
External economies of scale: When individuals consume same or similar products economy become less product types more production quantity from more product types less production quantity. This transformation increase productivity by external economies of scale.

2)
Bargaining power: Income equality provides import more specific goods and services with more quantity. That's gives the country monopsonist power in international trade. Similar thing valid in exports. Because of internal demand become more similar, domestic production focuses on similar products. That changes domestic production changes the export structure. Because of domestic production similar, export become more similar. That situation gives the country monopolies power in international trade.
3) Government expenditures: With income equality citizens' expectations from public services more similar. That provides government expenditures more efficient.

4)
National awareness raising and migration prevention: When domestic revenue distributed equally citizens' national awareness can be increase. That's prevent citizens' immigration to another country or area. So that prevents regional income inequality(Daşdemiṙ, 2017, s. 753).

5)
Reduces conflict of interest between classes: More equal society means more integrated individuals and classes based on the social division of labour. That means less conflict of interest between classes in country than international and regional conflict of interest. Therefore, the country can achieve a more internationally competitive structure (Daşdemir, 2019, ss. 12, 13).
Income equality can positively affect regional sustainable competitiveness (Rizzi vd., 2015, s. 316). But in this study, equality affects the directly competitiveness with the dynamics listed above.

Model and Data
Theoretical argument in study tested with panel data analysis. The model where the unit effects are valid is as follows.
= 0 + 1 + 2 + + The "L" sign in front of the variables indicates that the logarithms of the variables are taken. Logarithmic values of GCI and GINI variables were used in all analyses. "t" time, "i" unit, " " unit effects, " " error terms, " 0 " constant, and symbols given before the variables represents the coefficient of that variable.
Based on the theory, the expected LGINI value is negative. And the coefficient of the GDS variable used as the control variable is expected to be positive.
Since the effective method is random effects, deviations from the assumption in the model are tested accordingly. Results are given in the table below.

No Multiple Linear Connections
The results in the table show that the model includes deviation from three assumptions. Therefore, it is the standard errors model proposed by Driscoll and Kraay, (1998) must be considered for interpretation.

Results
The outputs of estimating the model with various methods are given in the

A Concluding Remark
This study revealed income distribution is an important determinant of competitiveness. Competitiveness of countries increases as income equality among citizens' increases. In this context, studies in the literature based on the hypothesis that the economic income is the cause of the economic distribution criticized. The income distribution that affects competitiveness also affects the income. Therefore, income equality is not a result but a cause. Countries wishing to increase their economic income should focus on policies that equalize the income distribution.