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The Shape of the Income Distribution and Economic Growth: Evidence from Swedish Labor Market Regions

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  • Rooth, Dan-Olof

    ()
    (Linnaeus University)

  • Stenberg, Anders

    ()
    (SOFI, Stockholm University)

Abstract

We analyze the association between inequality and growth across 72 labor market regions in Sweden 1990-2006. Highly accurate measures of growth and inequality (gini, Q3, p9075, p5010) are derived from population register data. The regional set-up also reduces problems with omitted variable bias and endogeneity found in cross country comparisons since the regions within a country share the same redistributive policies and institutions. The findings suggest that inequality between the 90th and 75th percentiles enhances regional growth. This result no longer holds when we take into account changes in commuting patterns. Although only suggestive, the finding is interesting in that it is consistent with the hypothesis that inequality enhances growth by stimulating commuting incentives.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5486.

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Length: 53 pages
Date of creation: Feb 2011
Date of revision:
Publication status: published in: Scottish Journal of Political Economy, 2012, 59 (2), 196-223
Handle: RePEc:iza:izadps:dp5486

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Keywords: gini; income distribution; growth; inequality;

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  1. Oskar Nordström Skans & Per-Anders Edin & Bertil Holmlund, 2009. "Wage Dispersion Between and Within Plants: Sweden 1985-2000," NBER Chapters, in: The Structure of Wages: An International Comparison, pages 217-260 National Bureau of Economic Research, Inc.
  2. George J. Borjas & Stephen G. Bronars & Stephen J. Trejo, 1992. "Self-Selection and Internal Migration in the United States," NBER Working Papers 4002, National Bureau of Economic Research, Inc.
  3. Anders Björklund & Richard Freeman, 2008. "Searching for Optimal Inequality/Incentives," NBER Working Papers 14014, National Bureau of Economic Research, Inc.
  4. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer, vol. 44(2), pages 349-375, April.
  5. Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, vol. 10(3), pages 273-296, 09.
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Cited by:
  1. Goulas, Eleftherios & Zervoyianni, Athina, 2013. "Growth, deficits and uncertainty: Theoretical aspects and empirical evidence from a panel of 27 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 380-392.
  2. Eleftherios Goulas & Athina Zervoyianni, 2013. "The Growth-Crime Relationship: Are There any Asymmetries?," Working Paper Series 54_13, The Rimini Centre for Economic Analysis.
  3. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper Series 53_13, The Rimini Centre for Economic Analysis.

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