Inequality and growth: industry-level evidence

Lisardo Erman () and Daniel Marcel Kaat ()
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Lisardo Erman: Osnabrück University
Daniel Marcel Kaat: Osnabrück University

Journal of Economic Growth, 2019, vol. 24, issue 3, No 3, 283-308

Abstract: Abstract Using a comprehensive data set of 22 industries in 86 countries over the period 1980–2012, we empirically identify the effect of inequality on industry-level value added growth. We show that an unequal income distribution increases the growth rates of physical-capital-intensive industries and reduces the growth rates of human-capital-intensive industries by lowering human capital and raising physical capital accumulation. Our study suggests that the empirical difficulty to identify a monotonic relationship between inequality and aggregate growth reflects differences in the relative importance of human and physical capital in a country’s production structure.

Keywords: Inequality-growth nexus; Human capital; Physical capital (search for similar items in EconPapers)
JEL-codes: E22 J24 O11 O15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s10887-019-09169-z

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