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Inequality and Growth: From Micro Theory to Macro Empirics

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Author Info
N. GOBBIN ()
G. RAYP ()
D. VAN DE GAER ()

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Abstract

To establish the nature of the link between income distribution and economic growth by means of a standard growth regression, one needs to collapse an entire income distribution into a scalar measure of inequality. Due to data shortages macro-economic research has typically been forced to use the gini coefficient for this purpose. Using a simulation set up we check how well different measures of inequality or poverty succeed in detecting the correct relationship. We find that the gini coefficient might not be the worst of choices, but the comparison of the explanatory power of different inequality measures can help to identify the theoretical mechanism through which inequality affects growth.

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Publisher Info
Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/258.

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Length: 32 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/258

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Related research
Keywords: income inequality; economic growth; inequality measures; poverty measures; simulation;

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Find related papers by JEL classification:
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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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.:
  1. Anthony B. Atkinson & Andrea Brandolini, 2000. "Promise and Pitfalls in the Use of 'Secondary' Data-Sets: Income Inequality in OECD Countries," Temi di discussione (Economic working papers) 379, Bank of Italy, Economic Research Department. [Downloadable!]
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  2. Niko Gobbin & Glenn Rayp, 2004. "Inequality and Growth: Does Time Change Anything," Development and Comp Systems 0402005, EconWPA. [Downloadable!]
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This page was last updated on 2009-11-30.

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