Inequality and Growth: From Micro Theory to Macro Empirics

Niko Gobbin, Glenn Rayp and Dirk Van de gaer

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: To establish the nature of the link between income distribution and economic growth by means of a standard growth regression, one needs to collapse an entire income distribution into a scalar measure of inequality. Due to data shortages macro-economic research has typically been forced to use the gini coefficient for this purpose. Using a simulation set up we check how well different measures of inequality or poverty succeed in detecting the correct relationship. We find that the gini coefficient might not be the worst of choices, but the comparison of the explanatory power of different inequality measures can help to identify the theoretical mechanism through which inequality affects growth.

Keywords: income inequality; economic growth; inequality measures; poverty measures; simulation (search for similar items in EconPapers)
JEL-codes: D63 O11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-09
New Economics Papers: this item is included in nep-dev and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://wps-feb.ugent.be/Papers/wp_04_258.pdf (application/pdf)

Related works:
Journal Article: INEQUALITY AND GROWTH: FROM MICRO THEORY TO MACRO EMPIRICS (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:04/258

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