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Analyzing the Causal Relationships between Economic Growth, Income Inequality, and Transmission Channels: New Empirical Evidences from Iran

Mehdi Hajamini ()
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Mehdi Hajamini: Department of Economics, Yazd University

Journal of Money and Economy, 2020, vol. 15, issue 3, 313-342

Abstract: This paper investigates causal relations between economic growth, income inequality, and transmission channels during the period 1972 to 2016. These channels include saving rate, investment rate, redistribution policies, human capital, and conspicuous consumption. There is no strong evidence that supports uni-directional or bi-directional causality. In addition, some of the transmission channels lead to improvement of economic growth and equality simultaneously. It concludes that the rapid economic growth and the income inequality alleviation are not necessary conflicting objectives. Hence, strategy of “Redistribution with growth” is a more effective and perhaps politically more acceptable approach than “growth before redistribution” or “redistribution before growth” strategies.

Keywords: Economic Growth; Income Inequality; Transmission Channels; Causality (search for similar items in EconPapers)
JEL-codes: C32 D31 O15 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:mbr:jmonec:v:15:y:2020:i:3:p:313-342