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Does inequality hamper long run growth? Evidence from Emerging Economies

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  • Suresh Babu, M.
  • Bhaskaran, Vandana
  • Venkatesh, Manasa

Abstract

In this paper, we analyse the simultaneous relationship between growth, distribution and re-distribution in selected twenty nine Emerging Economies. The analysis is premised on the distinction between market induced inequality, conceived as distribution, and the outcome post- government intervention as redistribution. Three issues emerge from our analysis; the lack of consistent data and uniform definition of ‘inequality’ in the empirical literature, the difficulty in establishing definitive causation between growth and the other two variables, and the complex linkages between growth, distribution and re-distribution, Our results show that, controlling for re-distributive transfers, inequality has a significant detrimental effect on growth in the long run. Further, we find no trade-off between re-distribution and growth both in the long run and short run.

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  • Suresh Babu, M. & Bhaskaran, Vandana & Venkatesh, Manasa, 2016. "Does inequality hamper long run growth? Evidence from Emerging Economies," Economic Analysis and Policy, Elsevier, vol. 52(C), pages 99-113.
    • Handle: RePEc:eee:ecanpo:v:52:y:2016:i:c:p:99-113
    DOI: 10.1016/j.eap.2016.08.005
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    5. Desogus, Marco & Casu, Elisa, 2022. "Chaos, granularity, and instability in economic systems of countries with emerging market economies: relationships between GDP growth rate and increasing internal inequality," MPRA Paper 115744, University Library of Munich, Germany, revised 2022.
    6. Adnen Ben Nasr & Mehmet Balcilar & Rangan Gupta & Seyi Saint Akadiri, 2018. "Asymmetric Effects of Inequality on Per Capita Real GDP of the United States," Working Papers 201820, University of Pretoria, Department of Economics.
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    8. Batuo E. Michael & George Kararach & Issam Malki, 2021. "Working Paper 353 - Inequality and the role of macroeconomic and institutional forces in Africa," Working Paper Series 2479, African Development Bank.
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    More about this item

    Keywords

    Market income inequality; Net income inequality; Growth; System GMM;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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