Income Inequality and Economic Growth
We develop an analytical framework to investigate some plausible channels that income inequality affects economic growth. Our empirical study concludes that income inequality has significant negative effect on the rate of GDP growth. Among the channels suggested by recent literature, we find that the most important one is the transfer channel while the least important one is the human capital channel. However, the direct impact of income inequality on the rate of productivity growth accounts for more than 55 percent of its overall total effect. This indicates that the effects of income inequality on economic growth are much more complicated than what we have perceived and modeled. Copyright 2000 by WWZ and Helbing & Lichtenhahn Verlag AG
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Volume (Year): 53 (2000)
Issue (Month): 3 ()
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References listed on IDEAS
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- Clarke, George R. G., 1995.
"More evidence on income distribution and growth,"
Journal of Development Economics,
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- Persson, T. & Tabellini, G., 1993.
"Is Inequality Harmful for Growth,"
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- Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
- Oded Galor & Joseph Zeira, 1993.
"Income Distribution and Macroeconomics,"
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Oxford University Press, vol. 60(1), pages 35-52.
- Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April.
- 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.
- Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-1032, December.
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