Income inequality in the process of economic development : An empirical approach

This thesis studies the effect of income inequality on economic growth. This is done by analyzing panel data from several countries with both short and long time dimensions of the data. Two of the chapters study the direct effect of inequality on growth, and one chapter also looks at the possible indirect effect of inequality on growth by assessing the effect of inequality on savings. In Chapter two, the effect of inequality on growth is studied by using a panel of 70 countries and a new EHII2008 inequality measure. Chapter contributes on two problems that panel econometric studies on the economic effect of inequality have recently encountered: the comparability problem associated with the commonly used Deininger and Squire s Gini index, and the problem relating to the estimation of group-related elasticities in panel data. In this study, a simple way to 'bypass' vagueness related to the use of parametric methods to estimate group-related parameters is presented. The idea is to estimate the group-related elasticities implicitly using a set of group-related instrumental variables. The estimation results with new data and method indicate that the relationship between income inequality and growth is likely to be non-linear. Chapter three incorporates the EHII2.1 inequality measure and a panel with annual time series observations from 38 countries to test the existence of long-run equilibrium relation(s) between inequality and the level of GDP. Panel unit root tests indicate that both the logarithmic EHII2.1 inequality measure and the logarithmic GDP per capita series are I(1) nonstationary processes. They are also found to be cointegrated of order one, which implies that there is a long-run equilibrium relation between them. The long-run growth elasticity of inequality is found to be negative in the middle-income and rich economies, but the results for poor economies are inconclusive. In the fourth Chapter, macroeconomic data on nine developed economies spanning across four decades starting from the year 1960 is used to study the effect of the changes in the top income share to national and private savings. The income share of the top 1 % of population is used as proxy for the distribution of income. The effect of inequality on private savings is found to be positive in the Nordic and Central-European countries, but for the Anglo-Saxon countries the direction of the effect (positive vs. negative) remains somewhat ambiguous. Inequality is found to have an effect national savings only in the Nordic countries, where it is positive.

Rapsista tuotetun biodieselin ja vehnästä tuotetun bioetanolin energiavirrat ja ympäristövaikutukset Euroopan unionissa

The aim of this thesis was to study the crops currently used for biofuel production from the following aspects: 1. what should be the average yield/ ha to reach an energy balance at least 0 or positive 2. what are the shares of the primary and secondary energy flows in agriculture, transport, processing and usage, and 3. overall effects of biofuel crop cultivation, transport, processing and usage. This thesis concentrated on oilseed rape biodiesel and wheat bioethanol in the European Union, comparing them with competing biofuels, such as corn and sugarcane-based ethanol, and the second generation biofuels. The study was executed by comparing Life Cycle Assessment-studies from the EU-region and by analyzing them thoroughly from the differences viewpoint. The variables were the following: energy ratio, hectare yield (l/ha), impact on greenhouse gas emissions (particularly CO2), energy consumption in crop growing and processing one hectare of a particular crop to biofuel, distribution of energy in processing and effects of the secondary energy flows, like e.g. wheat straw. Processing was found to be the most energy consuming part in the production of biofuels. So if the raw materials will remain the same, the development will happen in processing. First generation biodiesel requires esterification, which consumes approximately one third of the process energy. Around 75% of the energy consumed in manufacturing the first generation wheat-based ethanol is spent in steam and electricity generation. No breakthroughs are in sight in the agricultural sector to achieve significantly higher energy ratios. It was found out that even in ideal conditions the energy ratio of first generation wheat-based ethanol will remain slightly under 2. For oilseed rape-based biodiesel the energy ratios are better, and energy consumption per hectare is lower compared to wheat-based ethanol. But both of these are lower compared to e.g. sugarcane-based ethanol. Also the hectare yield of wheat-based ethanol is significantly lower. Biofuels are in a key position when considering the future of the world’s transport sector. Uncertainties concerning biofuels are, however, several, like the schedule of large scale introduction to consumer markets, technologies used, raw materials and their availability and - maybe the biggest - the real production capacity in relation to the fuel consumption. First generation biofuels have not been the expected answer to environmental problems. Comparisons made show that sugarcane-based ethanol is the most prominent first generation biofuel at the moment, both from energy and environment point of view. Also palmoil-based biodiesel looks promising, although it involves environmental concerns as well. From this point of view the biofuels in this study - wheat-based ethanol and oilseed rape-based biodiesel - are not very competitive options. On the other hand, crops currently used for fuel production in different countries are selected based on several factors, not only based on thier relative general superiority. It is challenging to make long-term forecasts for the biofuel sector, but it can be said that satisfying the world's current and near future traffic fuel consumption with biofuels can only be regarded impossible. This does not mean that biofuels shoud be rejected and their positive aspects ignored, but maybe this reality helps us to put them in perspective. To achieve true environmental benefits through the usage of biofuels there must first be a significant drop both in traffic volumes and overall fuel consumption. Second generation biofuels are coming, but serious questions about their availability and production capacities remain open. Therefore nothing can be taken for granted in this issue, expect the need for development.