American Economic Review Vol. 90 No. 4 2000
A Reassessment of the Relationship Between Inequality and Growth
Abstract
This paper challenges the current belief that income inequality has a negative relationship with economic growth. It uses an improved data set on income inequality which not only reduces measurement error, but also allows estimation via a panel technique. Panel estimation makes it possible to control for time-invariant country-specific effects, therefore eliminating a potential source of omitted-variable bias. Results suggest that in the short and medium term, an increase in a country's level of income inequality has a significant positive relationship with subsequent economic growth. This relationship is highly robust across samples, variable definitions, and model specifications.
- DOI
- 10.1257/aer.90.4.869
- Volume
- 90
- Issue
- 4
- Pages
- 869-887
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex