INEQUALITY AND GROWTH: NON-MONOTONIC EFFECTS VIA EDUCATION AND FERTILITY

Akihito Asana

No 841, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper examines the effect of inequality upon economic growth. Much of the existing empirical literature has found a negative effect of inequality upon long run growth. In contrast, our theoretical model, in which heterogeneous individuals jointly determine the levels of investment in human capital and fertility, predicts that the effect of inequality upon growth is non-monotonic: inequality impedes growth in low fertility economies, but fosters growth in high fertility economies. We provide empirical support for this prediction by estimating a system of equations to which growth, investment in human capital, and fertility are endogenous.

Keywords: Growth; Inequality; Human Capital; Fertility (search for similar items in EconPapers)
JEL-codes: D31 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2002
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