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

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Author Info
Eiji Yamamura
Inyong Shin

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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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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/10168730902903391&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Publisher Info
Article provided by Korean International Economic Association 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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Related research
Keywords: Inequality; economic growth; fixed effects;

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  2. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March. [Downloadable!] (restricted)
  3. Eiji Yamamura & Tetsushi Sonobe & Keijiro Otsuka, 2005. "Time path in innovation, imitation, and growth: the case of the motorcycle industry in postwar Japan," Journal of Evolutionary Economics, Springer, vol. 15(2), pages 169-186, January. [Downloadable!] (restricted)
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  5. Mo, Pak Hung, 2000. "Income Inequality and Economic Growth," Kyklos, Blackwell Publishing, vol. 53(3), pages 293-315.
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  10. Guido Tabellini, 2005. "The Role of the State in Economic Development," Kyklos, Blackwell Publishing, vol. 58(2), pages 283-303, 04. [Downloadable!] (restricted)
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  11. Banerjee, Abhijit V & Duflo, Esther, 2003. " Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-99, September. [Downloadable!] (restricted)
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  12. Montalvo, Jose G. & Reynal-Querol, Marta, 2005. "Ethnic diversity and economic development," Journal of Development Economics, Elsevier, vol. 76(2), pages 293-323, April. [Downloadable!] (restricted)
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  17. Eiji Yamamura & Inyong Shin, 2007. "Technological Change and Catch-up and Capital Deepening: Relative Contributions to Growth and Convergence: Comment," Economics Bulletin, Economics Bulletin, vol. 15(3), pages 1-8. [Downloadable!]
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  19. Joan Esteban & Carlos Gradín & Debraj Ray, 2007. "An Extension of a Measure of Polarization, with an application to the income distribution of five OECD countries," Journal of Economic Inequality, Springer, vol. 5(1), pages 1-19, April. [Downloadable!] (restricted)
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