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The relationship between economic growth and inequality: evidence from the age of market liberalism

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  • Gerardo Angeles-Castro
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    Abstract

    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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    Bibliographic Info

    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_009.

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    Length: 44 pages
    Date of creation: Jun 2006
    Date of revision:
    Handle: RePEc:deg:conpap:c011_009

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    Related research

    Keywords: Income Distribution; Economic Growth; Dynamic Panel Data Models; Time-Series Analysis;

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    References

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    Cited by:
    1. Muhammad Shahbaz, 2010. "Income inequality-economic growth and non-linearity: a case of Pakistan," International Journal of Social Economics, Emerald Group Publishing, vol. 37(8), pages 613-636, July.

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