INEQUALITY AND GROWTH: ANOTHER LOOK WITH A NEW MEASURE AND METHOD

Authors


Tuomas Malinen, Department of Economic and Political Studies, University of Helsinki, Arkadiankatu 7, PO box 17, FI-00014, Helsinki, Finland.

E-mail: tuomas.malinen@helsinki.fi

ABSTRACT

Recent empirical research on the relationship between income inequality and economic growth has provided controversial results. Some studies predict a negative effect of inequality on growth and some a positive effect. Answers to the controversy have usually been sought in the problems of the estimation technique, the measure of inequality or in some form of non-linearity in the relationship between inequality and growth. This study accounts for these problems by using an improved measure of income distribution and a parametric group-related panel estimation. In conclusion, we find that the effect of inequality is likely to be non-linear. Copyright © 2012 John Wiley & Sons, Ltd.

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