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Wealth inequality, governance and economic growth

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  • Islam, Md. Rabiul
  • McGillivray, Mark

Abstract

Links between economic growth and inequality are of growing interest for researchers and policy makers. Previous studies of this relationship have focused mainly on inequalities in income rather than in wealth. Yet from many perspectives wealth inequality is arguably more important. Using a new panel data set from Credit Suisse for 45 sample countries over the period 2000–2012, this study investigates the effects of wealth inequality on economic growth. Empirical results from system GMM estimation suggest that the wealth inequality is negatively associated with cross-country economic growth. This result is robust to alternative estimators and measures of wealth inequality, as well as the econometric specification. Further empirical investigation reveals that impact of wealth inequality on growth is mitigated by better governance.

Suggested Citation

  • Islam, Md. Rabiul & McGillivray, Mark, 2020. "Wealth inequality, governance and economic growth," Economic Modelling, Elsevier, vol. 88(C), pages 1-13.
    • Handle: RePEc:eee:ecmode:v:88:y:2020:i:c:p:1-13
    DOI: 10.1016/j.econmod.2019.06.017
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    More about this item

    Keywords

    Wealth inequality; Growth; Governance; Panel data;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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