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Does the Profile of Income Inequality Matter for Economic Growth?

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  • Sarah Voitchovsky

Abstract

This paper investigates the importance of the shape of the income distribution as a determinant of economic growth in a panel of countries. Using comparable data on disposable income from the Luxembourg Income Study, results show that aggregate inequality measures, such as Gini coefficients, can mask key features of the relationship between inequality and growth. In particular, inequality at the top end and bottom end of the distribution appear to have opposite effects on growth. This finding supports the argument that the profile of the income distribution, and not only its spread, helps define the impact of inequality on growth.
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Suggested Citation

  • Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, vol. 10(3), pages 273-296, September.
    • Handle: RePEc:kap:jecgro:v:10:y:2005:i:3:p:273-296
    DOI: 10.1007/s10887-005-3535-3
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    More about this item

    Keywords

    growth; inequality; income distribution; Gini coefficient; O4; D3;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • D3 - Microeconomics - - Distribution

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    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Does the Profile of Income Inequality Matter for Economic Growth? (JEG 2005) in ReplicationWiki

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