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Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce


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Volume 24 (2020)

Income Inequality and Economic Growth: Heterogeneity and Nonlinearity

Abebe Hailemariam / Ratbek Dzhumashev
Published Online: 2019-07-20 | DOI: https://doi.org/10.1515/snde-2018-0084

Abstract

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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Keywords: economic growth; heterogeneity; income inequality; nonlinearity; threshold analysis

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About the article

Published Online: 2019-07-20


Citation Information: Studies in Nonlinear Dynamics & Econometrics, 20180084, ISSN (Online) 1558-3708, DOI: https://doi.org/10.1515/snde-2018-0084.

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