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An econometric analysis of the relationship between inequality and growth

Lyberg, Dag (2006)
Department of Economics
Abstract
In this paper, the role of inequality in growth economics is investigated. Barro (2000) found a positive interaction between inequality and GDP on the growth rate, using data for 1960-2000. This paper focuses on a robustness check of his results due to a revision of the Ginis from Deininger and Squire (1997) in the WIID2 dataset. My regressions cover the same time periods and include additional data from the Fraser Institute in line with the theories proposed by Barro. The findings are: When not controlling for fertility, (1) a lower degree of income inequality enhances growth, therefore reducing inequality increases growth and (2) there is a positive interaction between income dispersion and GDP on growth, thus more inequality increases... (More)
In this paper, the role of inequality in growth economics is investigated. Barro (2000) found a positive interaction between inequality and GDP on the growth rate, using data for 1960-2000. This paper focuses on a robustness check of his results due to a revision of the Ginis from Deininger and Squire (1997) in the WIID2 dataset. My regressions cover the same time periods and include additional data from the Fraser Institute in line with the theories proposed by Barro. The findings are: When not controlling for fertility, (1) a lower degree of income inequality enhances growth, therefore reducing inequality increases growth and (2) there is a positive interaction between income dispersion and GDP on growth, thus more inequality increases growth in rich countries and reduces growth in poor countries. When controlling for fertility, (3) the relationship between inequality and growth disappears altogether. Unlike Barro, I find that income inequality is only significant if fertility is absent. Thus, reducing child birth is the key to higher growth. (Less)
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author
Lyberg, Dag
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Tillväxt, ekonometri, ojämlikhet, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1334528
date added to LUP
2006-06-16
date last changed
2010-08-03 10:49:19
@misc{1334528,
  abstract     = {In this paper, the role of inequality in growth economics is investigated. Barro (2000) found a positive interaction between inequality and GDP on the growth rate, using data for 1960-2000. This paper focuses on a robustness check of his results due to a revision of the Ginis from Deininger and Squire (1997) in the WIID2 dataset. My regressions cover the same time periods and include additional data from the Fraser Institute in line with the theories proposed by Barro. The findings are: When not controlling for fertility, (1) a lower degree of income inequality enhances growth, therefore reducing inequality increases growth and (2) there is a positive interaction between income dispersion and GDP on growth, thus more inequality increases growth in rich countries and reduces growth in poor countries. When controlling for fertility, (3) the relationship between inequality and growth disappears altogether. Unlike Barro, I find that income inequality is only significant if fertility is absent. Thus, reducing child birth is the key to higher growth.},
  author       = {Lyberg, Dag},
  keyword      = {Tillväxt,ekonometri,ojämlikhet,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {An econometric analysis of the relationship between inequality and growth},
  year         = {2006},
}