Article

The Journal of Economic Inequality

, Volume 10, Issue 4, pp 489-503

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Inequality and growth: evidence from panel cointegration

  • Dierk HerzerAffiliated withSchumpeter School of Business and Economics, University of Wuppertal
  • , Sebastian VollmerAffiliated withCenter for Population and Development Studies, Harvard UniversityInstitute of Macroeconomics, University of HannoverDevelopment Economics Research Group, University of Göttingen Email author 

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.

Keywords

Inequality Growth Panel cointegration

JEL Classification

O11 O15 C23