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Inequality And Growth: Non-Monotonic Effects Via Education And Fertility

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  • Akihito Asana
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    Abstract

    This paper examines the effect of inequality upon economic growth. Much of the existing empirical literature has found a negative effect of inequality upon long run growth. In contrast, our theoretical model, in which heterogeneous individuals jointly determine the levels of investment in human capital and fertility, predicts that the effect of inequality upon growth is non-monotonic: inequality impedes growth in low fertility economies, but fosters growth in high fertility economies. We provide empirical support for this prediction by estimating a system of equations to which growth, investment in human capital, and fertility are endogenous.

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    Bibliographic Info

    Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 841.

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    Length: 39 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:mlb:wpaper:841

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    Web page: http://www.economics.unimelb.edu.au
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    Related research

    Keywords: Growth; Inequality; Human Capital; Fertility;

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    References

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    1. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
    2. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
    3. Anand, Sudhir & Kanbur, S. M. R., 1993. "Inequality and development A critique," Journal of Development Economics, Elsevier, vol. 41(1), pages 19-43, June.
    4. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
    5. Birdsall, Nancy & Ross, David & Sabot, Richard, 1995. "Inequality and Growth Reconsidered: Lessons from East Asia," World Bank Economic Review, World Bank Group, vol. 9(3), pages 477-508, September.
    6. Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April.
    7. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    8. repec:chb:bcchwp:03 is not listed on IDEAS
    9. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
    10. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
    11. Galor, Oded & Tsiddon, Daniel, 1997. " The Distribution of Human Capital and Economic Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 93-124, March.
    12. Galor, Oded & Zang, Hyoungsoo, 1997. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Japan and the World Economy, Elsevier, vol. 9(2), pages 197-229, May.
    13. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
    14. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    15. Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
    16. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
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