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Inequality, Poverty, and Growth: Cross-Country Evidence

  • Garbis Iradian
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    This paper examines the empirical relationship between inequality and growth, and analyzes the impacts of growth, inequality, and government spending on poverty reduction. A new panel dataset has been assembled on inequality and poverty that reduces measurement error and ensures comparability across countries and over time. The empirical results in this paper challenge the belief that income inequality has a negative effect on growth and confirm the validity of the Kuznets curve. Credit market imperfections in low- and medium-income countries are identified as the likely reason for the positive link between inequality and growth over the short-to-medium term. In the long term, inequality may have an adverse impact on growth.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/28.

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    Length: 39
    Date of creation: 01 Feb 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/28
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    1. Garbis Iradian, 2003. "Armenia: The Road to Sustained Rapid Growth-Cross-Country Evidence," IMF Working Papers 03/103, International Monetary Fund.
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    5. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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    8. Panizza, Ugo, 2002. " Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March.
    9. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
    10. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    11. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    12. Keefer, Philip & Knack, Stephen, 2000. "Polarization, politics, and property rights : links between inequality and growth," Policy Research Working Paper Series 2418, The World Bank.
    13. Bourguignon, Francois, 1981. "Pareto Superiority of Unegalitarian Equilibria in Stiglitz' Model of Wealth Distribution with Convex Saving Function," Econometrica, Econometric Society, vol. 49(6), pages 1469-75, November.
    14. Galor, Oded, 2000. "Income distribution and the process of development," European Economic Review, Elsevier, vol. 44(4-6), pages 706-712, May.
    15. Smith, Douglas, 2001. "International evidence on how income inequality and credit market imperfections affect private saving rates," Journal of Development Economics, Elsevier, vol. 64(1), pages 103-127, February.
    16. Tripathi, Gautam, 2000. "Econometric Methods," Econometric Theory, Cambridge University Press, vol. 16(01), pages 139-142, February.
    17. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
    18. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    19. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    20. Ravallion, Martin, 1997. "Good and bad growth: The human development reports," World Development, Elsevier, vol. 25(5), pages 631-638, May.
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