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Inequality and growth: evidence from panel cointegration

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  • Dierk Herzer

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  • Sebastian Vollmer

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Abstract

This paper uses heterogeneous panel cointegration techniques to estimate the long-run effect of income inequality on per-capita income for 46 countries over the period 1970–1995. We find that inequality has a negative long-run effect on income, both for the sample as a whole and for important sub-groups within the sample (developed countries, developing countries, democracies, and non-democracies). The effect is economically important, with a magnitude about half as high as the magnitude of an increase in the investment share. Copyright The Author(s) 2012

Suggested Citation

  • Dierk Herzer & Sebastian Vollmer, 2012. "Inequality and growth: evidence from panel cointegration," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 489-503, December.
  • Handle: RePEc:kap:jecinq:v:10:y:2012:i:4:p:489-503 DOI: 10.1007/s10888-011-9171-6
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    More about this item

    Keywords

    Inequality; Growth; Panel cointegration; O11; O15; C23;

    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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