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Unsustainable Inequality: is there a turning point?

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  • Laura Policardo
  • Lionello F. Punzo
  • Edgar J. Sanchez Carrera

Abstract

A threshold estimation technique applied to a panel of 13 Latin American countries over the 1970-2011 time period, reveals the existence of a threshold level for the most popular index of income inequality (Gini's): below it past values of the index or per capita GDP appear to be unable to explain current variations in inequality, while beyond such a level the former may account for the decrease in current income inequality. So, there seems to be a turning point for income inequality though per capita GDP would have no effects on its dynamics. This result contributes further evidence on the dubious existence of the Kuznets Curve, and it links up with recent critical literature on the theme of increasing inequality and its shortcomings for growth

Suggested Citation

  • Laura Policardo & Lionello F. Punzo & Edgar J. Sanchez Carrera, 2016. "Unsustainable Inequality: is there a turning point?," Department of Economics University of Siena 728, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:728
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    References listed on IDEAS

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    4. Jess Benhabib, 2003. "The Tradeoff Between Inequality and Growth," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 491-507, November.
    5. Cornia, Giovanni Andrea (ed.), 2014. "Falling Inequality in Latin America: Policy Changes and Lessons," OUP Catalogue, Oxford University Press, number 9780198701804, Decembrie.
    6. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
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    8. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    9. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    10. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, vol. 15(2), pages 207-228, June.
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    Citations

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    Cited by:

    1. Policardo, Laura & Carrera, Edgar J. Sánchez, 2018. "Corruption causes inequality, or is it the other way around? An empirical investigation for a panel of countries," Economic Analysis and Policy, Elsevier, vol. 59(C), pages 92-102.
    2. Mikulas Luptacik & Bernhard Mahlberg, 2018. "Revisiting the Efficiency-Equity Trade-off: A Muli-objective Linear Problem combined with an extended Leontief Input Output Model," Department of Economic Policy Working Paper Series 016, Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava.

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    More about this item

    Keywords

    Dynamics of Income Inequality; Kuznets Curve; Threshold Effects;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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