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Regional Income Inequality and Economic Growth: A Spatial Econometrics Analysis for Provinces in the Philippines

Author

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  • Pede, Valerien O.
  • Sparks, Adam H.
  • McKinley, Justin D.

Abstract

This paper revisits the inequality-growth relationship using data at the sub-national (provincial) level in the Philippines over the period 1991- 2000. A conditional convergence growth model is considered where the growth of per capita income depends on inequality and other growth factors. The contribution of each province to the overall inequality obtained from the Theil index is considered. Results indicate that inequality has a positive and significant effect on per capita income growth. However, the magnitude of the inequality effect is not stable across regions. Geographically Weighted Regression estimates show that the magnitude of the inequality growth relationship varies over a range of 0.72 to 3.36. Other results are also noteworthy in this study. Per capita income grows faster in provinces that contribute more to the overall inequality. Provinces with higher poverty incidence tend to grow less and human capital appears to be a significant booster to per capita income growth. Additionally, urban provinces tend to grow faster than the rural ones.

Suggested Citation

  • Pede, Valerien O. & Sparks, Adam H. & McKinley, Justin D., 2012. "Regional Income Inequality and Economic Growth: A Spatial Econometrics Analysis for Provinces in the Philippines," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124402, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare12:124402
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    File URL: http://purl.umn.edu/124402
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    References listed on IDEAS

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    1. Ugo Panizza, 1999. "Income Inequality and Economic Growth: Evidence from the American Data," Research Department Publications 4178, Inter-American Development Bank, Research Department.
    2. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
    3. Laura de Dominicis & Raymond J. G. M. Florax & Henri L. F. de Groot, 2008. "A Meta-Analysis On The Relationship Between Income Inequality And Economic Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(5), pages 654-682, November.
    4. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
    5. 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.
    6. Mark D. Partridge, 2005. "Does Income Distribution Affect U.S. State Economic Growth?," Journal of Regional Science, Wiley Blackwell, vol. 45(2), pages 363-394.
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    Cited by:

    1. Muhammad Shahbaz & Ijaz Rehman & Nurul Mahdzan, 2014. "Linkages between income inequality, international remittances and economic growth in Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1511-1535, May.

    More about this item

    Keywords

    clusters; growth; inequality; spatial econometrics; Community/Rural/Urban Development; Research Methods/ Statistical Methods; R11; R12; O15; C21;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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