The Inequality-Growth Plateau

Daniel Henderson (), Junhui Qian and Le Wang

No 8771, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the (potentially nonlinear) relationship between inequality and growth using a method which does not require an a priori assumption on the underlying functional form. This approach reveals a plateau completely missed by commonly used (nonlinear) parametric approaches - the economy first expands rapidly with a large decline in inequality, plateaus when inequality remains relatively stable, and then decreases rapidly with a large increase in inequality. This novel finding helps reconcile the conflicting results in the literature (using different parametric assumptions and datasets) and has important policy implications.

Keywords: inequality; growth; panel data; semiparametric (search for similar items in EconPapers)
JEL-codes: C14 C5 O4 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2015-01
New Economics Papers: this item is included in nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Forthcoming - published in: Economics Letters, 2015, 128, 17-20

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Journal Article: The inequality–growth plateau (2015)
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