Inequality and Economic Growth : The Role of Initial Income
This paper estimates a panel model in which the relationship between inequality and gross domestic product per capita growth depends on countries' initial incomes. Estimates of the model show that the relationship between inequality and gross...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/574281528247194319/Inequality-and-economic-growth-the-role-of-initial-income http://hdl.handle.net/10986/29896 |
| Summary: | This paper estimates a panel model in
which the relationship between inequality and gross domestic
product per capita growth depends on countries' initial
incomes. Estimates of the model show that the relationship
between inequality and gross domestic product per capita
growth is significantly decreasing in countries'
initial incomes. The results from instrumental variables
regressions show that in low-income countries, transitional
growth is boosted by greater income inequality. In
high-income countries, inequality has a significant negative
effect on transitional growth. For the median country in the
world that in 2015 had a purchasing power parity gross
domestic product per capita of around US$10,000,
instrumental variables estimates predict that a 1 percentage
point increase in the Gini coefficient decreases gross
domestic product per capita growth over a five-year period
by over 1 percentage point; the long-run effect on the level
of gross domestic product per capita is around -5 percent. |
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