Income distribution and total factor productivity: a cross-country panel cointegration analysis

Delphin Kamanda Espoir () and Nicholas Ngepah
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Delphin Kamanda Espoir: University of Johannesburg, Auckland Park Kingsway Campus

International Economics and Economic Policy, 2021, vol. 18, issue 4, No 2, 698 pages

Abstract: Abstract This study investigates the relationship between income inequality and total factor productivity (TFP) across countries for a period covering the years 1990 to 2014. The research objective is to empirically assess the skill-biased technological change argument which supports the increasing income/wage inequality that has boosted productivity in recent decades. To achieve this objective, we utilized panel cointegration tests and a fully modified OLS and rolling window OLS regression. The findings show that income inequality significantly deters TFP in the long-term in developing countries. We found no evidence that income inequality affects TFP in the long-term in developed countries. These findings suggest that developing countries that are experiencing prolonged periods of rising income inequality are more exposed to: (i) low productivity and growth, (ii) a high risk of increase in the extreme poverty rate.

Keywords: Income inequality; Total factor productivity; Panel data (search for similar items in EconPapers)
JEL-codes: C23 C33 D63 O47 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10368-021-00494-6

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