Inkomstfördelningens roll för den ekonomiska tillväxten
(2011) NEKM09 20111Department of Economics
 Abstract
 This essay investigates the impact of income inequality on economic growth in developed countries. The link is primarily investigated through the possible influence of income inequality on the four growth channels savings, human capital, population growth and labor force productivity. A theoretical model, based on an extended version of the Romer model, is presented, where a higher degree of income inequality leads to a higher growth rate in GDP per capita in steady state. This higher growth rate can be explained by the theoretical model’s predictions that a higher degree of income inequality leads to a higher share of human capital in the educational sector and higher population growth. The theoretical model also predicts a correlation... (More)
 This essay investigates the impact of income inequality on economic growth in developed countries. The link is primarily investigated through the possible influence of income inequality on the four growth channels savings, human capital, population growth and labor force productivity. A theoretical model, based on an extended version of the Romer model, is presented, where a higher degree of income inequality leads to a higher growth rate in GDP per capita in steady state. This higher growth rate can be explained by the theoretical model’s predictions that a higher degree of income inequality leads to a higher share of human capital in the educational sector and higher population growth. The theoretical model also predicts a correlation between higher income inequality and aggregate savings and finally a positive correlation with labor force productivity.
In addition, an empirical investigation is performed where panel data from 26 European countries between the years 1995 and 2009 is used in panel least squares  and panel two stage least squares regressions. The findings from the empirical investigation support the theoretical model, showing that a higher degree of income inequality has a positive effect on economic growth. The results also indicate a positive relationship between a higher degree of income inequality and the share of human capital in the educational sector. The effect on aggregate savings is also significantly positive. The effect from income inequality on population growth is however ambiguous, depending on measures used. Finally, no significant effect on labor productivity can be shown. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/studentpapers/record/2117790
 author
 Lindqvist, Sofia ^{LU}
 supervisor

 Pontus Hansson ^{LU}
 organization
 course
 NEKM09 20111
 year
 2011
 type
 H1  Master's Degree (One Year)
 subject
 keywords
 income inequality, economic growth, developed countries, Romer model, regression analysis
 language
 Swedish
 id
 2117790
 date added to LUP
 20110906 14:25:26
 date last changed
 20110906 14:25:26
@misc{2117790, abstract = {This essay investigates the impact of income inequality on economic growth in developed countries. The link is primarily investigated through the possible influence of income inequality on the four growth channels savings, human capital, population growth and labor force productivity. A theoretical model, based on an extended version of the Romer model, is presented, where a higher degree of income inequality leads to a higher growth rate in GDP per capita in steady state. This higher growth rate can be explained by the theoretical model’s predictions that a higher degree of income inequality leads to a higher share of human capital in the educational sector and higher population growth. The theoretical model also predicts a correlation between higher income inequality and aggregate savings and finally a positive correlation with labor force productivity. In addition, an empirical investigation is performed where panel data from 26 European countries between the years 1995 and 2009 is used in panel least squares  and panel two stage least squares regressions. The findings from the empirical investigation support the theoretical model, showing that a higher degree of income inequality has a positive effect on economic growth. The results also indicate a positive relationship between a higher degree of income inequality and the share of human capital in the educational sector. The effect on aggregate savings is also significantly positive. The effect from income inequality on population growth is however ambiguous, depending on measures used. Finally, no significant effect on labor productivity can be shown.}, author = {Lindqvist, Sofia}, keyword = {income inequality,economic growth,developed countries,Romer model,regression analysis}, language = {swe}, note = {Student Paper}, title = {Inkomstfördelningens roll för den ekonomiska tillväxten}, year = {2011}, }