Does inequality hamper long run growth? Evidence from Emerging Economies

M. Suresh Babu, Vandana Bhaskaran and Manasa Venkatesh

Economic Analysis and Policy, 2016, vol. 52, issue C, 99-113

Abstract: In this paper, we analyse the simultaneous relationship between growth, distribution and re-distribution in selected twenty nine Emerging Economies. The analysis is premised on the distinction between market induced inequality, conceived as distribution, and the outcome post- government intervention as redistribution. Three issues emerge from our analysis; the lack of consistent data and uniform definition of ‘inequality’ in the empirical literature, the difficulty in establishing definitive causation between growth and the other two variables, and the complex linkages between growth, distribution and re-distribution, Our results show that, controlling for re-distributive transfers, inequality has a significant detrimental effect on growth in the long run. Further, we find no trade-off between re-distribution and growth both in the long run and short run.

Keywords: Market income inequality; Net income inequality; Growth; System GMM (search for similar items in EconPapers)
JEL-codes: C23 D63 F43 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:52:y:2016:i:c:p:99-113

DOI: 10.1016/j.eap.2016.08.005

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