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
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.:
- 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.
- Oded Galor & Joseph Zeira, 1993.
"Income Distribution and Macroeconomics,"
Review of Economic Studies,
Oxford University Press, vol. 60(1), pages 35-52.
- Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
- Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
- Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
- Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
- Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
- Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-1032, December.
- Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
- Clarke, George R. G., 1992. "More evidence on income distribution and growth," Policy Research Working Paper Series 1064, The World Bank.
- 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.
- Kang Park, 1998. "Distribution and growth: cross-country evidence," Applied Economics, Taylor & Francis Journals, vol. 30(7), pages 943-949.
- Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April. Full references (including those not matched with items on IDEAS)
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