This paper examines the relationship between income inequality and economic growth in a broad panel of countries over the period from 1965 to 2014. We utilize an improved dataset for inequality with reduced measurement errors, which fosters cross-country comparability. In addition, we investigate whether accounting for heterogeneity across countries alters the estimated effect of inequality on growth, and whether the inequality-growth nexus varies with the level of income inequality. Our estimates show that after accounting for heterogeneity, the nonlinear growth effect of income inequality remains statistically and economically significant. We find a threshold effect of inequality on economic growth, and this threshold is higher for developing economies than for developed economies.
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Galor, O. 2011. “Inequality, Human Capital Formation, and the Process of Development.” In: Handbook of the Economics of Education, edited by Eric A. Hanushek, Stephen Machin and Ludger Woessmann, Vol. 4, North Holland: Elsevier, pp 441–493.10.1016/B978-0-444-53444-6.00005-5)| false
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SNDE recognizes that advances in statistics and dynamical systems theory can increase our understanding of economic and financial markets. The journal seeks both theoretical and applied papers that characterize and motivate nonlinear phenomena. Researchers are required to assist replication of empirical results by providing copies of data and programs online. Algorithms and rapid communications are also published.