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Clustering and regime dynamics for economic growth and income inequality

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  • Brida, Juan Gabriel
  • Carrera, Edgar J. Sanchez
  • Segarra, Verónica

Abstract

This study explores the dynamic relationship between income inequality and economic growth by using a non-parametric approach and numerical taxonomy as a research method based on data symbolization and clustering methods. The study uses annual data of the GINI index (considering two databases, i.e. the Standardized World Income Inequality Database (SWIID) and the Estimated Household Income Inequality Data Set (EHII)) and the Per Capita GDP Growth Rates (economic growth variable) for two samples, i.e. 38 countries between 1980 and 2015, and 23 countries during the period 1980–2010. This novel methodology is used to detect the existence of clusters of countries sharing similar economic performance that are characterized by the income inequality variable. Once the homogeneous clusters are fixed, using a dynamic econometric approach, we study the Granger causal relationship between economic growth and income inequality, and the positive or negative long-run effects. Our results show that in advanced economies there is an economic growth policy supporting income distribution, while in poor or developing economies economic growth is enhanced by income concentration.

Suggested Citation

  • Brida, Juan Gabriel & Carrera, Edgar J. Sanchez & Segarra, Verónica, 2020. "Clustering and regime dynamics for economic growth and income inequality," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 99-108.
  • Handle: RePEc:eee:streco:v:52:y:2020:i:c:p:99-108
    DOI: 10.1016/j.strueco.2019.09.010
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    2. Kouadio, Hugues Kouassi & Gakpa, Lewis-Landry, 2022. "Do economic growth and institutional quality reduce poverty and inequality in West Africa?," Journal of Policy Modeling, Elsevier, vol. 44(1), pages 41-63.
    3. Juan Gabriel Brida & W. Adrian Risso & Edgar J. Sánchez Carrera & Verónica Segarra, 2021. "Growth and inequality in the Mexican states: Regimes, thresholds, and traps," Papers in Regional Science, Wiley Blackwell, vol. 100(5), pages 1295-1322, October.
    4. Dr. Ameenullah Aman & Dr. Usman Ahmad & Sumera Muhammad Saleem, 2021. "Investigating the Link Between Macroeconomic Factors and Income Inequality of Asian Countries," iRASD Journal of Economics, International Research Association for Sustainable Development (iRASD), vol. 3(3), pages 376-387, December.

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    More about this item

    Keywords

    Data symbolization; Minimum spanning tree; Multidimensional clustering methods; Inequality-growth regimes; Granger causality; Dynamic panel data;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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