Abstract
This thesis examines the effects of infrastructure improvements on income inequality. It provides an empirical evaluation based on the regression estimations, using data for a sample of 137 countries over 1960 to 2009 periods. The empirical analysis involves principle components analysis, a pooled data model, time fixed effects, country fixed effects, and country and time fixed effects. Principle components analysis helps build infrastructure indices to avoid multicollinearity issue among infrastructure variables. Time fixed effects are applied to control for factors that affect all countries the same through time and country fixed effects capture the unobserved characteristics of individual countries that do not change over time. The results do not support the hypothesis that infrastructure improvements decrease income inequality. Once country fixed effects are included, all infrastructure indices have statistically significant but positive coefficients. This means, when a country makes improvements that exceed the level of infrastructure in that country, the Gini coefficient will increase, reflecting a widening in the gap between the rich and poor.