Using a panel data set of countries this paper shows that the inequality-growth relationship follows an ordinary-U curve during the period 1970-98, in which inequality first decreases and then increases with economic growth. In addition, there is some evidence that the increasing pattern may reverse at higher levels of income. A time-series approach shows that a substantial group of countries capture a minimum turning point in different years along the period and others follow a permanent positive trend. It also indicates that only a few countries reverse inequality in a latter stage and display a maximum turning point after the mid 1990s; these countries are associated with macroeconomic stability, high governance and moderate expansion of trade and FDI. Hence, the inequality-growth relationship during the era of market openness has tended to change towards a positive one, although it might reverse at a later stage.
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number
c011_009.
Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data F01 - International Economics - - General - - - Global Outlook O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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