Empirical Assessment of Business Competitiveness and Income Distribution: A Case of Selected Lower-Middle-Income Economies

The present study attempts to quantify the quadratic nexus between income distribution and business competitiveness. The study also adds interaction term of development expenditure with business competitiveness to examine impact of both on income inequality. The present study uses yearly panel data from 2008 to 2018 for 27 lower-middle-income economies. The results of the study are based on Quantile Regression for Panel Data (QRPD). The findings of the study reveal a U-shaped pattern between business competitiveness and income inequality. Further, an insignificant negative impact of development expenditure on income inequality is observed. However, if lower-middle-income economies take into account development expenditure with business competitiveness then the impact on income inequality gets significant with the same sign. The variable urban population is significant and decreases income inequality while broad money (proxy of financial development), trade, and rule of law have a significant role in increasing income inequality. The study suggests that development expenditure and business competitiveness may increase simultaneously for more equal distribution of income. Moreover, standardization of rule of law in lower-middle-income economies is also very important for equal distribution of income.