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Inequality, growth fluctuations, and employment

Author

Listed:
  • Burcu Hacibedel

    (International Monetary Fund)

  • Pierre Mandon

    (World Bank)

  • Priscilla Muthoora

    (International Monetary Fund)

  • Nathalie Pouokam

    (International Monetary Fund)

Abstract

This paper analyses how short-term fluctuations in economic growth affect inequality in developing countries. Using a sample of 71 countries, we find that, on average, growth upswings are associated with reductions in inequality. This reduction is, however, largely undone by growth slowdowns. A mediation analysis framework helps identify unemployment, especially youth unemployment, as the main channel through which fluctuations in growth affect the dynamics of inequality. These findings suggest that both the quality of jobs created, and labor market policies are important to ensure that growth outcomes are conducive to inequality reduction.

Suggested Citation

  • Burcu Hacibedel & Pierre Mandon & Priscilla Muthoora & Nathalie Pouokam, 2024. "Inequality, growth fluctuations, and employment," Empirical Economics, Springer, vol. 66(2), pages 587-622, February.
    • Handle: RePEc:spr:empeco:v:66:y:2024:i:2:d:10.1007_s00181-023-02476-w
    DOI: 10.1007/s00181-023-02476-w
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    More about this item

    Keywords

    Inequality; Growth; Developing countries; Mediation analysis;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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