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On the relation between income distribution and economic growth

Mohsen Bahmani-Oskooee () and Abera Gelan

Global Business and Economics Review, 2012, vol. 14, issue 4, 249-273

Abstract: Most of the research on the relation between economic growth and income distribution has concentrated on the well-known Kuznets inverted-U hypothesis which claims that economic growth initially worsens income inequality and then it improves it. A few studies have argued that income inequality could also affect economic growth through its impact on saving and investment. In this paper, we use time-series data from 18 developing countries along with the bounds testing approach and investigate bi-directional causality between economic growth and a measure of income inequality. We find that while there is short-run bi-directional causality in most countries, the long-run causality is limited to less than half of the countries in the sample.

Keywords: income distribution; economic growth; causality; bounds testing; income inequality. (search for similar items in EconPapers)
Date: 2012
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Handle: RePEc:ids:gbusec:v:14:y:2012:i:4:p:249-273