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Inequality and Economic Growth Over the Business Cycle: Evidence From U.S. State-Level Data

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  • Mark W. Frank

    () (Department of Economics and International Business, Sam Houston State University)

  • Donald G. Freeman

    () (Department of Economics and International Business, Sam Houston State University)

Abstract

The purpose of this paper is to re-examine the empirical relationship between income inequality and economic growth using U.S. State-level data during the post-war period. The use of state-level data provides a sample that is relatively homogeneous in many non-economic characteristics, unlike the international data used in most previous work. Building upon prior research, this study addresses the issues of potential non-linearities in the relationship between inequality and growth, the influence of the cyclical condition during the year sampled, and possible bias in the measurement of economic growth. We find, using GMM estimators, that inequality is harmful to growth, and that the deleterious effects of inequality are greater for lower income states.

Suggested Citation

  • Mark W. Frank & Donald G. Freeman, 2003. "Inequality and Economic Growth Over the Business Cycle: Evidence From U.S. State-Level Data," Working Papers 0301, Sam Houston State University, Department of Economics and International Business.
  • Handle: RePEc:shs:wpaper:0301
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    File URL: http://www.shsu.edu/academics/economics-and-international-business/documents/wp_series/wp03-01.pdf
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    Cited by:

    1. Macan, Vaneza Jean & Deluna, Roperto Jr, 2013. "Relationship of Income Inequality and Labor Productivity on Fertility in the Philippines: 1985-2009," MPRA Paper 51679, University Library of Munich, Germany.

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