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World Interest Rates And Inequality: Insight From The Galor–Zeira Model

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  • Battisti, Michele
  • Fioroni, Tamara
  • Lavezzi, Andrea Mario

Abstract

In this paper, we study the relationship between changes in the world interest rate and within-country inequality during the 1985–2005 period in which the world interest rate sharply declined. In line with the predictions of the seminal model of Galor and Zeira [Income distribution and macroeconomics. Review of Economic Studies 60, 35–52], the analysis suggests that the decrease in the world interest rate is associated with a decrease in inequality in poor countries and an increase in inequality in rich ones.

Suggested Citation

  • Battisti, Michele & Fioroni, Tamara & Lavezzi, Andrea Mario, 2020. "World Interest Rates And Inequality: Insight From The Galor–Zeira Model," Macroeconomic Dynamics, Cambridge University Press, vol. 24(5), pages 1042-1072, July.
    • Handle: RePEc:cup:macdyn:v:24:y:2020:i:5:p:1042-1072_2
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    Cited by:

    1. Muneza Munir & Ambreen Fatima, 2020. "Financing Inclusive Growth through FDI: Incorporating the Role of Institutional Quality," Global Economics Review, Humanity Only, vol. 5(2), pages 29-46, June.

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