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Revisiting the Relationship between Income Inequality and Economic Growth

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  • Ricardo Argüello Cuervo

    () (Universidad del Rosario)

Abstract

Most models that explore the relationship between income inequality and economic growth postulate the existence of a negative correlation between the two operating through diverse channels. parallel to the theoretical models, a number of empirical studies have attempted to appraise this relationship . A broad consensus had built validating the existence of such negative correlation until some panel data studies tended to show the opposite result. The review of ensuing debate as well as the empirical estimation undertook in this paper show that estimates may not be as robust believed. It is suggested that country case studies may be to explore this issue more appropriately.

Suggested Citation

  • Ricardo Argüello Cuervo, 2006. "Revisiting the Relationship between Income Inequality and Economic Growth," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 64, pages 37-58, Enero-Jun.
  • Handle: RePEc:lde:journl:y:2006:i:64:p:37-58
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    References listed on IDEAS

    as
    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    3. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, pages 399-407.
    4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    5. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, pages 1615-1660.
    6. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
    7. Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-334, October.
    8. Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 173-189.
    9. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    10. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
    11. repec:dau:papers:123456789/10091 is not listed on IDEAS
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    More about this item

    Keywords

    income distribution; Growth; Panel Data Econometrics; Multi regional;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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