GROWTH AND INEQUALITY: IS THERE ANY CLEAR-CUT RELATIONSHIP

Abstract

Theory predicts complex and multidimensional relationships between inequality and growth. Indeed, previous studies on inequality and growth using various estimation techniques, inequality measures, country samples and time frames have found conflicting results ranging from positive , negative, non-linear to insignificant and inconclusive relationships. In this study, we follow the model of Forbes (2000) to examine whether or not inequality affects growth. With the newly improved inequality data provided by the University of Texas Inequality Project (UTIP, 2013), we used the System-GMM to estimate the relationship in a panel of 65 countries over the period 1965-2005 on 5-year interval. We found a positive but statistically insignificant co-efficient of inequality on growth

Keywords: Growth, Income Distribution, Inequality, System GMM


Article Review Status: Published

Pages: 25-48 (Download PDF)

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