, Volume 10, Issue 4, pp 489-503,
Open Access This content is freely available online to anyone, anywhere at any time.
Date: 24 Feb 2011

Inequality and growth: evidence from panel cointegration

Abstract

This paper uses heterogeneous panel cointegration techniques to estimate the long-run effect of income inequality on per-capita income for 46 countries over the period 1970–1995. We find that inequality has a negative long-run effect on income, both for the sample as a whole and for important sub-groups within the sample (developed countries, developing countries, democracies, and non-democracies). The effect is economically important, with a magnitude about half as high as the magnitude of an increase in the investment share.