Effects of Income Inequality on Growth through Efficiency Improvement and Capital Accumulation

Eiji Yamamura () and Inyong Shin

International Economic Journal, 2009, vol. 23, issue 2, 237-258

Abstract: In the present paper, the inverted-U shape relationship between economic growth and inequality found in Chen (2003) is re-examined. We decompose productivity growth into efficiency improvement, capital accumulation and technological progress and then ascertain their determinants by employing fixed effects and dynamic panel models. In particular, this paper focuses on the question of how economic inequality affects capital accumulation and efficiency improvement. Key findings are that inequality enhances efficiency improvement as well as capital accumulation and then undermines them as inequality widens. However, other factors such as human capital, openness and government consumption have different effects on them.

Keywords: Inequality; economic growth; fixed effects (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (6)

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DOI: 10.1080/10168730902903391

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