Income inequality and growth: A regime-switching approach

Nektarios Aslanidis ()

No 406, Working Papers from University of Crete, Department of Economics

Abstract: This paper explores the methodology of regime-switching in the analysis of the income inequality-economic growth relationship. The underlying idea is that when some income determinant passes a certain threshold introduces a new relationship between inequality and income and/or income determinants. There are three implications of the estimated models. First, inequality decreases with economic growth when government consumption as share of GDP is ‘low’. Second, in a ‘low’ inflation environment government consumption increases inequality. Third, in countries with ‘strict’ rule of law openness to international trade and government consumption are associated with lower inequality, while financial development implies higher inequality.

Keywords: Kuznets curve; regime-switching; growth determinants; thresholds (search for similar items in EconPapers)
JEL-codes: C23 O11 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2004-02-02
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