Income inequality and growth: A regime-switching approach
AbstractThis paper explores the methodology of regime-switching in the analysis of the income inequality-economic growth relationship. The underlying idea is that when some income determinant passes a certain threshold introduces a new relationship between inequality and income and/or income determinants. There are three implications of the estimated models. First, inequality decreases with economic growth when government consumption as share of GDP is ‘low’. Second, in a ‘low’ inflation environment government consumption increases inequality. Third, in countries with ‘strict’ rule of law openness to international trade and government consumption are associated with lower inequality, while financial development implies higher inequality.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0406.
Length: 8 pages
Date of creation: 02 Feb 2004
Date of revision:
Kuznets curve; regime-switching; growth determinants; thresholds;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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