Inequality and Economic Growth: An Overview (original) (raw)

Economic Growth and Inequality

This report aims that explaining concept of economic inequality and its effects on economic growth of countries. In this project, we focused on some particular economic variables to explain their relationship with economic growth by analyzing for 73 countries in order to period of 1993 – 2013. These variables consist of rate of growth (dependent variable), central government debt, foreign direct investment, GDP per capita, GINI index, gross capital formation, labor force with secondary education, research and development expenditure and finally internal direct investment (independent variable). In next sections of the report, we will explain more deeply each of these variables to understand better of their impacts on economic growth.

Inequality and Growth

2013

The paper study cross country analysis for 18 countries to see the effects of gender inequality in education (human capita proxy), Labor force participation (employment proxy) and its impacts on constant growth of Gdp. The regressions are run individual country at a time. The approach is necessary and sufficient conditions to identify the determinants of inequality of each country and the effects on country’s growth from 1980 to 2010.The results Shaw that in most countries if we control the direct impacts of gender inequality like openness, pop-growth, and investment, the labor force participation female-male ratios have highest impacts on growth than others employment variables. The results also found out that education with secondary female-male ratios have greater impacts on growth compared to education with tertiary female-male ratios. Another important point to note is that in most of these 18 countries of the world their appeared a problems of collinearity in employment data. ...

Inequality and economic growth: theoretical and operational approach

Theoretical and Applied Economics, 2015

The relationship between inequality and the process of economic development is still controversial. In this paper, besides a short overview of the economic literature, we present selected models used to verify the relationship between growth and inequality. We also make a brief analysis of income inequality and poverty in Romania.

INEQUALITY AND ECONOMIC GROWTH

The objective of this paper is to study the effect of in equality on economic growth of a set of eight developing countries during the period 2000-2009, using a dynamic panel data model and a simultaneous equations model. The key findings generated from these two empirical tests stipulate a negative effect of inequality on economic growth and vice versa.

Inequality and Growth Re-Examined

Technology and Investment, 2012

This paper examines the relationship between income inequality and subsequent economic growth. It builds on the model suggested by Alesina and Rodrik (1994) in which inequality works through greater demands for redistribution to slow down growth, and the idea by Ray (1998) that inequality negatively affects savings, work capacity, economic incentives, and access to and efficiency of credit and financial markets. Using an updated dataset and seven model variants, both OLS and 2SLS regressions find a strong negative effect of income inequality on future growth. The effect is considerably stronger for developing countries, but the existence or absence of democracy has no effect on either the relationship between inequality and growth or on the rate of growth itself. There is also no support for Barro's (2008) claim that inequality impacts growth positively in developed countries.

Inequality and Growth: Uncovering the Main Conclusions from the Empirics

Journal of Development Studies, 2014

The theme of the relationship between inequality and economic growth has gained considerable attention among economists over the last two decades. In this paper, we analyse the effect of inequality on growth, whose related literature has been producing inconclusive results. After an exhaustive study of the major empirical works in this specific research area, we are able not only to advance with some potential explanations for the apparent lack of consensus on the empirical assessment of the inequality-growth relationship, but also to achieve a better understanding of the nature of this relationship and the forces underlying it. We conclude that the disparities found in the results of the estimation of the reduced-form relationship are most likely due to three dimensions: differences in the estimation techniques, the countries and the periods included in the sample, and the variable used to measure inequality. The last two aspects have particularly important implications. First, country/region specificities play a crucial role in the relationship between inequality and growth, so more emphasis should be put on the estimation of such a relationship on a national/regional basis, rather than trying to establish universal patterns. Second, the time horizon of the analysis should be carefully chosen, as different transmission channels from inequality to growth tend to operate differently in the short and in the long-run. Third, the fact that inequality in wealth distribution has a stronger negative effect on growth than inequality in income distribution may indicate that the channels through which inequality affects growth are not the same in both distributions. Therefore, we argue that in order to produce an accurate assessment of both the reduced-form relationship and the underlying transmission channels these aspects should be accordingly considered, which has not been the case in most of the empirical literature.

Inequality and growth revisited

Trinity Economic Paper Series, 1999

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 ...

The Relationship Between Economic Growth and Income Inequality

International Journal of Economics and Financial Issues, 2013

The objective of this work is to study the nature of the relationship between income inequality and economic growth in Tunisia. To do this, we started with a review of the literature. Then we conducted an empirical study on the Tunisian case over the period 1984-2011. The main results show that economic growth and openness exchange constituted aggravating factors of inequalities and that these effects are accentuated with the accelerated process of trade liberalization in the country. However, human capital and financial development appears to have contributed to the alleviation of this problem.The second result shows that inequality had a negative effect on economic growth and that this effect appeared more after the acceleration of the process of opening exchange. This result can be explained by the fact that the country has reached an "unbearable" level of inequality. Similarly, it can be explained by the failure of redistribution policies.

Growth and Income Inequality: A Comparative Analysis

2012

This paper investigates whether the relationship between income inequality and growth changes over time. Two time periods, covering 1970-1985 and 1985-1999, are analyzed and compared. A statistically significant relationship between inequality and growth in either time period fails to emerge. However, there are indications that effect of inequality on growth may be different in the nineties when compared to the seventies. In the literature, a consistent negative effect of inequality on growth is documented although the significance of the effect is open to debate. This paper also finds a negative effect of income inequality on growth in the seventies but, although statistically insignificant, a consistently positive effect in the nineties.

Reassessing the Relationship between Economic Growth and Inequality

2011

This study attempts to reassess the relationship between economic growth and inequality using an up to date data set, 2003-2007, for a sample of seventy-four developed and developing countries. Average economic growth during this studied period is regressed against the 2003 values of inequality, growth, education, human development, inflation and governance quality using OLS cross-country models. The findings support a negative impact of inequality on economic growth for the entire sample. In particular, an increase (decrease) in inequality would lead to greater deterioration (expansion) in economic development in low-income countries than in high-and middle-income countries. Furthermore, improvement in governance does not either stimulate or hinder the economic growth.