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Inequality, Human Capital and Development: Making the Theory Face the Facts

  • Papageorgiou, Chris
  • Razak, Nor Azam Abdul

Recent theoretical contributions assert that income inequality impacts negatively human capital accumulation, and consequently long-run growth. Galor and Zeira (1993) show that such a relationship works primarily through financial constraints, while de la Croix and Doepke (2003) demonstrate that the relationship could also work via differential fertility between poor and rich. In this paper, we first test the inequality-human capital-output hypothesis in a sample of 46 countries for the period 1970—2000. In the baseline estimation specification and various robustness checks, we obtain results that lend strong support to this relationship. Second, we examine which of the two mechanisms, finds more support in the data. and show evidence in favor of the differential fertility mechanism.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18973.

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Date of creation: 30 Nov 2009
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Handle: RePEc:pra:mprapa:18973
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  1. Durlauf,S.N. & Johnson,P.A. & Temple,J.R.W., 2004. "Growth econometrics," Working papers 18, Wisconsin Madison - Social Systems.
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