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Empirical Economics

, Volume 42, Issue 1, pp 209–233 | Cite as

Estimating the long-run relationship between income inequality and economic development

  • Tuomas MalinenEmail author
Article

Abstract

There are several theories describing the effect of income inequality on economic growth. These theories usually predict that there exists some optimal, steady-state growth path between inequality and development. This study uses a new measure of income distribution and panel data cointegration methods to test for the existence of such a steady-state equilibrium relation. It is shown that there is a long-run equilibrium relationship between the variables, and that this relationship is negative in developed economies.

Keywords

EHII2.1 Panel cointegration Developed and developing economies 

JEL Classification

C23 O15 O40 

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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Department of Economics and FDPEUniversity of HelsinkiHelsinkiFinland

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