The non-linear effect of inequality on investment

Jorge Carrera and Pablo de la Vega

International Review of Applied Economics, 2021, vol. 35, issue 5, 684-713

Abstract: We fill a gap in the literature on the investment determinants that do not take into account distributive issues, estimating the effect of income inequality on investment based on a heterogeneous panel of 95 countries from 1990 to 2015. Additionally, we (i) control for a wide set of control variables, contrasting different theoretical approaches, including trade and financial globalization; (ii) analyze advanced and developing countries; and (iii) test for a possible non-linear relationship between inequality and investment. Unlike the Kuznets curve, which fades in data panels, we find a significant and non-linear (‘U-shaped’) relationship between inequality and investment even when controlling for the panel dimension. At low levels of initial inequality, the relationship is negative; at high levels of initial inequality, the relationship is positive. A possible explanation for our results lies in the interaction between inequality, the productive matrix and international integration.

Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/02692171.2020.1849043 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:irapec:v:35:y:2021:i:5:p:684-713

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIRA20

DOI: 10.1080/02692171.2020.1849043

Access Statistics for this article

International Review of Applied Economics is currently edited by Professor Malcolm Sawyer

More articles in International Review of Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().