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Income inequality and minimum consumption: implications for growth Author info | Abstract | Publisher info | Download info | Related research | Statistics Donald S. Allen
Leonce Ndikumana
We propose a model that recognizes hierarchical goods and income inequality among households. The model demonstrates that growth is impacted not by inequality per se, but "absolute" income distribution or the level of poverty underlying the income distribution. Specifically, when a large fraction of the population is below the threshold income necessary for subsistence, aggregate consumption is depressed. In low-income countries, high inequality of income retards consumption growth, whereas in high-income countries inequality may be neutral for growth. Cross-country regressions indicate a positive and significant relationship between the middle quintile share of income and aggregate consumption. In all cases analyzed, increasing income in the middle quintile increases consumption growth
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Date of creation: 1999Date of revision:
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Keywords: Income distribution ; Consumption (Economics) ; References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.:
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