Income Concentration and Economic Growth in the Neoliberal Period (1980-2014)

J. Vaca

Studies in Economics and Econometrics, 2020, vol. 44, issue 2, 109-132

Abstract: Fiscal reforms, which were the result of neoliberal economic policies, have led many countries to higher levels of inequality since the 1980s. This paper shows that the impact of income concentration on economic growth is both positive and negative, depending on the degree of accumulation. A positive relationship is observed when the concentration is moderate, but, when it becomes extreme, its impact turns negative. This trend is reflected in an inverted U-shaped curve. Using a GMM model, for a sample of 31 countries, it is found that the curve undergoes a change of direction when the 99th percentile accounts for approximately 24-26% of the total national income (this turning point is lower for OECD countries [14%] than for non-OECD countries [28%]). Also, the slopes suggest that the negative effects are much greater (about twice) than the positive ones.

Date: 2020
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DOI: 10.1080/10800379.2020.12097364

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