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Effects of Income Inequality on Growth through Efficiency Improvement and Capital Accumulation

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  • Eiji Yamamura
  • Inyong Shin

Abstract

In the present paper, the inverted-U shape relationship between economic growth and inequality found in Chen (2003) is re-examined. We decompose productivity growth into efficiency improvement, capital accumulation and technological progress and then ascertain their determinants by employing fixed effects and dynamic panel models. In particular, this paper focuses on the question of how economic inequality affects capital accumulation and efficiency improvement. Key findings are that inequality enhances efficiency improvement as well as capital accumulation and then undermines them as inequality widens. However, other factors such as human capital, openness and government consumption have different effects on them.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 23 (2009)
Issue (Month): 2 ()
Pages: 237-258

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Handle: RePEc:taf:intecj:v:23:y:2009:i:2:p:237-258

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Keywords: Inequality; economic growth; fixed effects;

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Cited by:
  1. Muhammad Shahbaz & Ijaz Rehman & Nurul Mahdzan, 2014. "Linkages between income inequality, international remittances and economic growth in Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1511-1535, May.
  2. Alexander Cotte Poveda & Clara Inés Pardo Martínez, 2011. "Las tendencias de la pobreza y la desigualdad: una evidencia para los departamentos de Colombia," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 29-50, November.

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