 Inequality and Growth RevisitedEconomic Papers from Trinity College Dublin, Economics Department Abstract: In recent years, a vast literature on the links between inequality and growth has flourished. The emerging consensus is that equality enhances growth, but disagreement exists on the underlying mechanisms. In this paper, we aim to provide the reader with new empirical evidence from a cross sectional analysis of countries. First, we try to improve upon the accuracy of previous empirical models by using new data on inequality extracted from Deininger and Squire (1996). Second, we test alternative specifications of the relationship between growth, redistribution and inequality. Third, we test the relevance of the theoretical models proposed in the literature to explain the inequality-growth relationship. Results suggest that first, the link between inequality and growth is robust to measurement errors in inequality. Second, the fertility-education issue is the main explanatory factor of the link. Third, we find a non-linear relationship between inequality, redistribution and growth, which tends to confirm B nabou's model (1996). However, there is also evidence to support an alternative explanation, in which there is reverse causality between redistribution and inequality: accordingly, countries would be considered unequal because of their weak redistributive policies. JEL-codes: D3 H5 O1 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:992 Access Statistics for this paper More papers in Economic Papers from Trinity College Dublin, Economics Department Contact information at EDIRC. |
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