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Transitional Growth and Income Inequality: Anything Goes

Author

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  • Chris Elbers

    (Free University Amsterdam)

  • Jan Willem Gunning

    (Free University Amsterdam)

Abstract

The effect of initial income inequality on growth is the subject of a large literature. We show, both analytically and with simulation experiments, that the same level of initial income inequality can be associated with very different income developments, depending on the source of the inequality. We consider three sources: differences in asset ownership, in productivity and in shocks. For these three sources the monotonicity, the persistence and even the sign of the resulting income changes can differ. We stress the implications for empirical work.

Suggested Citation

  • Chris Elbers & Jan Willem Gunning, 2004. "Transitional Growth and Income Inequality: Anything Goes," GE, Growth, Math methods 0409001, University Library of Munich, Germany, revised 08 Sep 2004.
    • Handle: RePEc:wpa:wuwpge:0409001
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    References listed on IDEAS

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    3. Thorbecke, Erik & Charumilind, Chutatong, 2002. "Economic Inequality and Its Socioeconomic Impact," World Development, Elsevier, vol. 30(9), pages 1477-1495, September.
    4. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    5. repec:dau:papers:123456789/10091 is not listed on IDEAS
    6. Banerjee, Abhijit V & Duflo, Esther, 2003. "Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-299, September.
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    Cited by:

    1. Zainab Iftikhar & Amanat Ali, 2012. "Impact Of Income Inequality And Defence Burden On Economic Growth," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(03), pages 1-15.
    2. Otter, Thomas, 2007. "Does Inequality Harm Income Mobility and Growth? An Assessment of the Growth Impact of Income and Education Inequality in Paraguay 1992: 2002," Proceedings of the German Development Economics Conference, Göttingen 2007 25, Verein für Socialpolitik, Research Committee Development Economics.
    3. Gille, Véronique, 2015. "Distribution of human capital and income: An empirical study on Indian States," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 239-256.
    4. Thomas Otter, 2009. "Does Inequality Harm Income Mobility and Growth? An Assessment of the Growth Impact of Income and Education Inequality in Paraguay 1992-2002," Ibero America Institute for Econ. Research (IAI) Discussion Papers 188, Ibero-America Institute for Economic Research.
    5. Hoogeveen,Johannes G. & Schipper,Youdi, 2005. "Which inequality matters? Growth evidence based on small area welfare estimates in Uganda," Policy Research Working Paper Series 3592, The World Bank.

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    More about this item

    Keywords

    Inequality; Growth; Ramsey models;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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