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Effects of income inequality on aggregate output

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  • Brueckner,Markus
  • Lederman,Daniel

Abstract

This paper estimates the effect of income inequality on real gross domestic product per capita using a panel of 104 countries during the period 1970?2010. The empirical analysis addresses endogeneity issues by using instrumental variables estimation and controlling for country and time fixed effects. The analysis finds that, on average, income inequality has a significant negative effect on transitional gross domestic product per capita growth and the long-run level of gross domestic product per capita. However, the impact varies by the level of economic development, so much so that in poor countries income inequality has a significant positive effect on gross domestic product per capita.

Suggested Citation

  • Brueckner,Markus & Lederman,Daniel, 2015. "Effects of income inequality on aggregate output," Policy Research Working Paper Series 7317, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7317
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    Cited by:

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    2. Mohammed TOUITOU & Ahmed BOUDEGHDEGH, 2021. "Estimating the relationship between governance, economic growth, inequality and poverty," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(628), A), pages 115-128, Autumn.
    3. Wencong Cai & Yuanjie Deng & Qiangqiang Zhang & Haiyu Yang & Xuexi Huo, 2021. "Does Income Inequality Impair Health? Evidence from Rural China," Agriculture, MDPI, vol. 11(3), pages 1-18, March.
    4. Andy Sumner, 2016. "The world's two new middles: Growth, precarity, structural change, and the limitations of the special case," WIDER Working Paper Series wp-2016-34, World Institute for Development Economic Research (UNU-WIDER).
    5. Gan-Ochir Doojav & Ariun-Erdene Bayarjargal, 2017. "Implications of Economic Growth, Poverty and Inequality in Mongolia over the Period of 2008-2012," The Northeast Asian Economic Review, ERINA - Economic Research Institute for Northeast Asia, vol. 5(2), pages 15-29, October.
    6. Tusawar Iftikhar Ahmad & Abdul Rehman & Abid Mehmood & Nosheena Sattar, 2022. "Nexus among Democracy, Human Resource Development, and Income Inequality: Three Stage Least Square Estimation for 47 Developing Economies," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 4(4), pages 607-620, December.
    7. Marcos Gómez & Francisco Parro, 2018. "The Fundamental Contradiction Of Capitalism Revisited," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 381-399, October.
    8. E. Wesley F. Peterson, 2017. "Is Economic Inequality Really a Problem? A Review of the Arguments," Social Sciences, MDPI, vol. 6(4), pages 1-25, December.

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    More about this item

    Keywords

    Pro-Poor Growth; Economic Theory&Research; Services&Transfers to Poor; Inequality; Poverty Impact Evaluation;
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