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Inequality and growth in advanced economies: an empirical investigation

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Abstract

This paper empirically investigates the effect of income and human capital inequality on economic growth in different regions of the world. In the estimation of a dynamic panel data model that controls for country-specific effects and takes into account the persistency of the inequality indicators, the results show a different effect of inequality on growth depending on the level of development of the region. Specifically, we find a negative effect of income and human capital inequality on economic growth, both in the sample as a whole and in the low and middle-income economies, an effect that vanishes or becomes positive in the higher-income countries.

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Authors and Affiliations

  1. Instituto de Economía Internacional, Facultad de Economía, Universidad de Valencia, Campus dels Tarongers, 46022, Valencia, Spain

    Amparo Castelló-Climent

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  1. Amparo Castelló-Climent
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Correspondence to Amparo Castelló-Climent.

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I am grateful to Pedro Albarran, Rafael Doménech, Javier Ferri, three anonymous referees and the editors, Andrea Brandolini and Cecilia García-Peñalosa, for their comments and suggestions, I also thank participants at the 4th ECFIN Annual Research Conference: Growth on Income Distribution in an Integrated Europe: Does EMU Make a Difference (Brussels, October 2007) for helpful discussions.

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Castelló-Climent, A. Inequality and growth in advanced economies: an empirical investigation. J Econ Inequal 8, 293–321 (2010). https://doi.org/10.1007/s10888-010-9133-4

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  • DOI: https://doi.org/10.1007/s10888-010-9133-4

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