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Rising top incomes do not raise the tide

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  • Herzer, Dierk
  • Vollmer, Sebastian

Abstract

This paper examines the long-run relationship between top income shares and economic growth for a panel of nine high-income countries over the period from 1961 to 1996. We use panel cointegration and causality techniques that are robust to omitted variables, slope heterogeneity, and endogenous variables. Our main findings are that an increase in the top decile of income share reduces growth, and that long-run causality also runs in the opposite direction—from economic growth to top income shares.

Suggested Citation

  • Herzer, Dierk & Vollmer, Sebastian, 2013. "Rising top incomes do not raise the tide," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 504-519.
  • Handle: RePEc:eee:jpolmo:v:35:y:2013:i:4:p:504-519
    DOI: 10.1016/j.jpolmod.2013.02.011
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    Citations

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    Cited by:

    1. Stephan Klasen & Nathalie Scholl & Rahul Lahoti & Sophie Ochmann & Sebastian Vollmer, 2016. "Inequality – Worldwide Trends and Current Debates," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 209, Courant Research Centre PEG.
    2. Leena Kalliovirta & Tuomas Malinen, 2015. "Nonlinearity and cross-country dependence of income inequality," Working Papers 358, ECINEQ, Society for the Study of Economic Inequality.
    3. Tuomas Malinen, 2016. "Does income inequality contribute to credit cycles?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(3), pages 309-325, September.
    4. Thomas Goda & Alejandro Torres, 2015. "Class or location? What explains the rising tide of absolute global income inequality during 1850-2010?," DOCUMENTOS DE TRABAJO CIEF 012663, UNIVERSIDAD EAFIT.
    5. Cabral, René & García-Díaz, Rocío & Mollick, André Varella, 2016. "Does globalization affect top income inequality?," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 916-940.
    6. Thomas Goda & Alejandro Torres García, 2017. "The Rising Tide of Absolute Global Income Inequality During 1850–2010: Is It Driven by Inequality Within or Between Countries?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1051-1072, February.
    7. Herzer, Dierk, 2014. "The long-run relationship between trade and population health: evidence from five decades," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100441, Verein für Socialpolitik / German Economic Association.
    8. repec:bla:worlde:v:40:y:2017:i:2:p:462-487 is not listed on IDEAS
    9. Tuominen Elina, 2016. "Changes or levels? Reassessment of the relationship between top-end inequality and growth," Working Papers 1609, University of Tampere, School of Management, Economics.
    10. Thomas Goda & Santiago Sanchez, 2017. "Market and disposable top income shares adjusted by national accounts data," LIS Working papers 715, LIS Cross-National Data Center in Luxembourg.
    11. Krenz, Astrid, 2016. "Do political institutions influence international trade? Measurement of institutions and the Long-Run effects," Center for European, Governance and Economic Development Research Discussion Papers 276, University of Goettingen, Department of Economics.
    12. Tuominen Elina, 2016. "Top-end inequality and growth: Empirical evidence," Working Papers 1608, University of Tampere, School of Management, Economics.
    13. Khusainov, Bulat & Kireyeva, Anel & Sultanov, Ruslan, 2017. "Eurasian Economic Union: Asymmetries of Growth Factors," MPRA Paper 78841, University Library of Munich, Germany.

    More about this item

    Keywords

    Top income shares; Trickle-down economics; Income inequality; Growth; Panel cointegration;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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