Factors of Income Inequality and Their Influence Mechanisms: a Theoretical Overview

When analysing the factors of income inequality, first as many factors as possible have to be included in order to obtain valid results. The present article systematises the factors of income inequality discussed in the pertinent literature into five groups and summarises the hypotheses about the signs of the influences of the discussed factors on income inequality. But additionally the influences between the factors themselves that form indirect effects on income inequality have to be included. In this article, these influences are discussed and arranged in a system to give an idea about the possible indirect effects on income inequality of all the factors discussed in the article. 1 Lecturer of Economics, Ph.D., University of Tartu, Faculty of Economics and Business Administration, Narva 4-A210, Tartu 51009, Estonia, Phone: +3727375842, E-mail: [email protected]