Mind the wage gap: an empirical analysis of the impact of labour income inequality on economic growth*

Rebecca Gramiscelli Hasparyk, Rafael Saulo Marques Ribeiro and Ana Bottega

Review of Keynesian Economics, 2023, vol. 11, issue 1, 10-30

Abstract: This work aims to contribute to recent literature that empirically analyses the relationship between inequality in the labour market and economic growth. To do so, we measured wage inequality by using the ratio between the wages of the 10% of workers with the highest earnings and the wages of the bottom 40% of workers with the lowest earnings (10/40 ratio), capturing the wage gap between the two extreme classes of wage earners. We also used a panel data modelling approach, assuming that the main relationship studied is endogenous, and a sample with 189 countries in the period between 2004 and 2017. Our findings indicate a negative effect of wage inequality on economic growth.

Keywords: wage inequality; growth; demand-led models; dynamic panel data; system GMM (search for similar items in EconPapers)
JEL-codes: C33 E12 J31 O11 O40 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:11:y:2023:i:1:p10-30

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