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Inequality and growth: evidence from panel cointegration

The Journal of Economic Inequality volume 10, pages 489–503 (2012)Cite this article

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.

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Author information

Affiliations

  1. Schumpeter School of Business and Economics, University of Wuppertal, Gaußstr. 20, 42119, Wuppertal, Germany

    Dierk Herzer

  2. Center for Population and Development Studies, Harvard University, 9 Bow Street, Cambridge, MA, 02138, USA

    Sebastian Vollmer

  3. Institute of Macroeconomics, University of Hannover, Hannover, Germany

    Sebastian Vollmer

  4. Development Economics Research Group, University of Göttingen, Göttingen, Germany

    Sebastian Vollmer

Authors
  1. Dierk Herzer
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  2. Sebastian Vollmer
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Corresponding author

Correspondence to Sebastian Vollmer.

Additional information

We are grateful to two anonymous referees for excellent suggestions that considerably improved this paper. Sebastian Vollmer acknowledges financial support from the German Academic Exchange Service and the German Research Foundation (grant VO 1592/3-1).

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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

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Herzer, D., Vollmer, S. Inequality and growth: evidence from panel cointegration. J Econ Inequal 10, 489–503 (2012). https://doi.org/10.1007/s10888-011-9171-6

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Keywords

  • Inequality
  • Growth
  • Panel cointegration

JEL Classification

  • O11
  • O15
  • C23