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Effects of income inequality on the economic growth of Brazilian states

Author

Listed:
  • Cássio Nobrega Besarria
  • Jevuks Matheus Araujo
  • Andrea Ferreira da Silva
  • Erika Fernanda Miranda Sobral
  • Thiago Geovane Pereira

Abstract

Purpose - The purpose of this paper is to investigate the effects of income inequality on the economic growth of Brazilian states in the period from 1994 to 2014. The transmission mechanism of the effects of income inequality on economic growth is derived from the model proposed by Halteret al.(2014). Design/methodology/approach - The empirical formulation adopted to achieve this goal is divided into two stages. The first stage is limited to short-term analysis, and panel data models with fixed effects, random effects, and instrumental variables are used. In the second stage, the discussion turns to the use of the error correction model for a cointegrated panel. Findings - The findings of this study suggest that inequalities in income and educational level are the principal determinants of different growth rates among Brazilian states. More specifically, it is found that additional years of schooling positively influence growth. By contrast, income inequality negatively affects this indicator. Originality/value - The present study differs from the others in that it adapts the discussion proposed by Halteret al.(2014) to the analysis of Brazilian states. Halteret al.(2014) derive the transmission channel between income inequality and economic growth, showing a non-monotonic adjustment trajectory of production that leads to a linear theoretical model of income inequality and economic growth that is similar to those used in this type of approach.

Suggested Citation

  • Cássio Nobrega Besarria & Jevuks Matheus Araujo & Andrea Ferreira da Silva & Erika Fernanda Miranda Sobral & Thiago Geovane Pereira, 2018. "Effects of income inequality on the economic growth of Brazilian states," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 45(3), pages 548-563, March.
    • Handle: RePEc:eme:ijsepp:ijse-02-2017-0039
    DOI: 10.1108/IJSE-02-2017-0039
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    More about this item

    Keywords

    Income inequality; Economic growth; Brazilian states; C23; O4; O47;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • 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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