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Effects of Income Inequality on Growth through Efficiency Improvement and Capital Accumulation

  • Yamamura, Eiji
  • Shin, Inyong

In the present paper, the inverted-U shape relationship between growth and inequality found in Chen(2003), is reexamined. We decompose productivity growth into efficiency improvement, capital accumulation and technological progress and then ascertain their determinants by employing a fixed effects and dynamic panel models. In particular, this paper focuses on the question of how economic inequality affects capital accumulation and efficiency improvement. Key findings are that inequality enhances efficiency improvement as well as capital accumulation and then undermines them as inequality widens. However, other factors such as human capital, openness, and government consumption have different effects on them.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10220.

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Date of creation: 23 Apr 2008
Date of revision:
Handle: RePEc:pra:mprapa:10220
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