Income Inequality and Growth: New Insights from Italy

Bernard Njindan Iyke and Sin-Yu Ho
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Bernard Njindan Iyke: Deakin University, Melbourne, Victoria, Australia

Economia Internazionale / International Economics, 2017, vol. 70, issue 4, 419-442

Abstract: This paper investigates the impact of income inequality on economic growth in Italy during the period of 1967 to 2012. Specifically, using a technique that allows us to sort out long-run impacts from short-run impacts, we investigate whether income inequality benefits or harms growth, after controlling for human capital, labour, physical capital and inflation within an augmented growth model. Amid the existing debatable theoretical and empirical studies, our results suggest that income inequality has a negative and significant impact on growth in the long run. The negative impact of income inequality on growth still exists in the short run. However, the coefficient becomes insignificant. Overall, we gather that inequality hurts growth in the country. Based on this finding, we provide some policy implications. Disuguaglianza dei redditi e crescita: nuove evidenze dall’Italia Questo studio esamina l’impatto della disuguaglianza nei redditi sulla crescita economica in Italia durante il periodo 1967-2012. In particolare con l’utilizzo di una tecnica che ci consente di distinguere gli effetti sul lungo periodo da quelli sul breve periodo, si analizza se la disuguaglianza di reddito beneficia o danneggia la crescita, tenuto conto del capitale umano, del lavoro, del capitale fisico e dell’inflazione all’interno di un modello di crescita ampliato. All’interno del dibattito teorico esistente e degli studi empirici, i risultati suggeriscono che la disuguaglianza di reddito ha un effetto negativo significante sulla crescita nel lungo periodo. Tale impatto negativo sussiste anche nel breve periodo, anche se il coefficiente risulta non significativo. In generale vi sono evidenze che la disuguaglianza danneggia la crescita economica.

Keywords: Income Inequality; Economic Growth; Italy (search for similar items in EconPapers)
JEL-codes: D63 O15 O47 O52 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (9)

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