Income inequality, financial development, and macroeconomic fluctuations
We examine the relationship between income inequality and variability in aggregate consumption growth. In high-income countries, greater income inequality appears to be associated with more volatility in consumption growth, whereas in lower-income countries, higher levels of income inequality tend to be associated with less volatility. We present evidence that variability in real GDP growth is also related to income inequality in the same way. Our results suggest that the level of financial development may help to explain why the distribution of income affects the short-run variability of consumption and output differently in high-income countries than in low-income countries. Copyright 2004 Royal Economic Society.
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Volume (Year): 114 (2004)
Issue (Month): 495 (04)
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- Galor, Oded & Zeira, Joseph, 1988.
"Income Distribution and Macroeconomics,"
51644, University Library of Munich, Germany, revised 01 Sep 1989.
- Banerjee, Abhijit V & Duflo, Esther, 2003.
"Inequality and Growth: What Can the Data Say?,"
Journal of Economic Growth,
Springer, vol. 8(3), pages 267-99, September.
- Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, December.
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