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Inequality and growth: What comes from the different inequality measures?

Jakub Bartak and Łukasz Jabłoński

Bulletin of Economic Research, 2020, vol. 72, issue 2, 185-212

Abstract: The objective of the paper is to verify if income inequality impedes the growth rates in OECD countries in the period of 1990–2014 and to reveal whether the choice of the income inequality measure determines the sign and the strength of the estimated relationship. We use system GMM to estimate parameters of a dynamic panel growth model. The research indicates that income inequality negatively affects economic growth. We also find evidence that various measures of inequality bring the different scale of consequences for economic growth, with measures that give more weight to the middle part of the distribution being the weakest predictor of GDP growth. Simultaneously, we present the test of weak instruments, which helps to explain these differences.

Date: 2020
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