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Does income inequality matter for economic growth? : An empirical investigation

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  • Chletsos, Michael
  • Fatouros, Nikolaos

Abstract

In this paper we empirically investigate a possible effect of income inequality on growth. Using a panel of 126 countries for the time-span from 1968 to 2007 we report a positive relationship between income inequality and growth. That occurs through both the taxation and the human capital channels. We estimate our model with several estimation techniques such as fixed effects, GMM and Two stages least squares. Our results suggest that a policy maker has to take into account a certain trade off between making the distribution of income more equal and raising the economy's wealth.

Suggested Citation

  • Chletsos, Michael & Fatouros, Nikolaos, 2016. "Does income inequality matter for economic growth? : An empirical investigation," MPRA Paper 75477, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75477
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    References listed on IDEAS

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    Cited by:

    1. Ionuț Jianu & Marin Dinu & Dragoș Huru & Alexandru Bodislav, 2021. "Examining the Relationship between Income Inequality and Growth from the Perspective of EU Member States’ Stage of Development," Sustainability, MDPI, vol. 13(9), pages 1-16, May.
    2. Jakub Bartak & Łukasz Jabłoński, 2020. "Inequality and growth: What comes from the different inequality measures?," Bulletin of Economic Research, Wiley Blackwell, vol. 72(2), pages 185-212, April.
    3. Ademola Obafemi Young, 2019. "Growth Impacts of Income Inequality: Empirical Evidence From Nigeria," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 226-262, December.
    4. Seher Gülşah Topuz, 2022. "The Relationship Between Income Inequality and Economic Growth: Are Transmission Channels Effective?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(3), pages 1177-1231, August.
    5. Quoc Hoi Le & Hoai Nam Nguyen, 2019. "The Impact of Income Inequality on Economic Growth in Vietnam: An Empirical Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(5), pages 617-629, May.

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    More about this item

    Keywords

    growth; inequality; welfare;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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