IDEAS home Printed from https://ideas.repec.org/p/tcd/tcduee/992.html
   My bibliography  Save this paper

Inequality and Growth Revisited

Author

Listed:
  • Figini, P

Abstract

In recent years, a vast literature on the links between inequality and growth has flourished. The emerging consensus is that equality enhances growth, but disagreement exists on the underlying mechanisms. In this paper, we aim to provide the reader with new empirical evidence from a cross sectional analysis of countries. First, we try to improve upon the accuracy of previous empirical models by using new data on inequality extracted from Deininger and Squire (1996). Second, we test alternative specifications of the relationship between growth, redistribution and inequality. Third, we test the relevance of the theoretical models proposed in the literature to explain the inequality-growth relationship. Results suggest that first, the link between inequality and growth is robust to measurement errors in inequality. Second, the fertility-education issue is the main explanatory factor of the link. Third, we find a non-linear relationship between inequality, redistribution and growth, which tends to confirm Bénabou's model (1996). However, there is also evidence to support an alternative explanation, in which there is reverse causality between redistribution and inequality: accordingly, countries would be considered unequal because of their weak redistributive policies.

Suggested Citation

  • Figini, P, 1999. "Inequality and Growth Revisited," Trinity Economics Papers 992, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduee:992
    as

    Download full text from publisher

    File URL: http://www.tcd.ie/Economics/TEP/1999_papers/TEPNo2PF99.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, pages 1184-1198.
    2. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, pages 465-490.
    3. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    4. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
    5. 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.
    6. Persson, Torsten & Tabellini, Guido, 1992. "Growth, distribution and politics," European Economic Review, Elsevier, pages 593-602.
    7. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, pages 399-407.
    8. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, pages 403-427.
    9. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    10. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, pages 259-287.
    11. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, pages 399-407.
    12. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, pages 600-621.
    13. Perotti, Roberto, 1992. "Income Distribution, Politics, and Growth," American Economic Review, American Economic Association, pages 311-316.
    14. Keefer, Philip & Knack, Stephen, 2002. "Polarization, Politics and Property Rights: Links between Inequality and Growth," Public Choice, Springer, vol. 111(1-2), pages 127-154, March.
    15. Dahan, Momi & Tsiddon, Daniel, 1998. "Demographic Transition, Income Distribution, and Economic Growth," Journal of Economic Growth, Springer, vol. 3(1), pages 29-52, March.
    16. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    17. Paolo Figini, 1998. "Measuring Inequality: On the Correlation of Indices," Economics Technical Papers 987, Trinity College Dublin, Department of Economics.
    18. Markus Knell, 1999. "Social Comparisons, Inequality, and Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 664-664, December.
    19. Paolo Figini, 1998. "Inequality Measures, Equivalence Scales and Adjustment for Household Size and Composition," Economics Technical Papers 988, Trinity College Dublin, Department of Economics.
    20. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," World Bank Economic Review, World Bank Group, vol. 8(3), pages 351-371, September.
    21. Chiu, W Henry, 1998. "Income Inequality, Human Capital Accumulation and Economic Performance," Economic Journal, Royal Economic Society, vol. 108(446), pages 44-59, January.
    22. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    23. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    24. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, pages 178-183.
    25. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, pages 1184-1198.
    26. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 151-172.
    27. Jin, Jing & Zou, Heng-fu, 2002. "How does fiscal decentralization affect aggregate, national, and subnational government size?," Journal of Urban Economics, Elsevier, pages 270-293.
    28. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, pages 600-621.
    29. Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, pages 1019-1032.
    30. Aghion, Philippe & Bolton, Patrick, 1992. "Distribution and growth in models of imperfect capital markets," European Economic Review, Elsevier, vol. 36(2-3), pages 603-611, April.
    31. Benhabib, Jess & Rustichini, Aldo, 1996. "Social Conflict and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 125-142, March.
    32. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, pages 869-887.
    33. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-1082, September.
    34. Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April.
    35. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lubimov, I.L., 2016. "Inequality and Growth: Theoretical Aspects of Dependence," Working Papers 2042, Russian Presidential Academy of National Economy and Public Administration.
    2. Bozhechkova, Aleksandra & Vashchelyuk, Natalia & Nazarov, Pavel & Perevyshin, Yuri & Tumanova, Elena & Shagas, Natalia, "undated". "Modeling the Dynamic of Economic Potential," Published Papers nvg143, Russian Presidential Academy of National Economy and Public Administration.
    3. Laura de Dominicis & Raymond J. G. M. Florax & Henri L. F. de Groot, 2008. "A Meta-Analysis On The Relationship Between Income Inequality And Economic Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(5), pages 654-682, November.
    4. Kazakova, M.V. & Kiblitskaya, T.R. & Lyubimov, I.L. & Nesterova, K.V., 2016. "Inequality and Economic Growth: An Empirical Evaluation of Foreign Countries and Russia," Working Papers 2043, Russian Presidential Academy of National Economy and Public Administration.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • D3 - Microeconomics - - Distribution

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tcd:tcduee:992. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia Hughes). General contact details of provider: http://edirc.repec.org/data/detcdie.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.