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Effects of Inequality on the Process of Economic Growth and Human Development: A Threshold Analysis

Heigert, Kilian LU (2021) NEKP01 20211
Department of Economics
Abstract
Theory is still inconclusive to what level income inequality affects economic growth, with little research accounting for the effects of human development. The paper aimed to analyze both the effects of income inequality on growth while controlling for the underlying effects of different human development indicators. This was done by using data of 55 countries for the period 1990-2019, with results being twofold. First, results from the applied panel threshold regression show that there exists a threshold of human development boosting and mitigating effects of income inequality towards economic growth in a beneficial way. Secondly, after splitting the sample into developed and developing countries, a general positive influence of... (More)
Theory is still inconclusive to what level income inequality affects economic growth, with little research accounting for the effects of human development. The paper aimed to analyze both the effects of income inequality on growth while controlling for the underlying effects of different human development indicators. This was done by using data of 55 countries for the period 1990-2019, with results being twofold. First, results from the applied panel threshold regression show that there exists a threshold of human development boosting and mitigating effects of income inequality towards economic growth in a beneficial way. Secondly, after splitting the sample into developed and developing countries, a general positive influence of inequality for developing countries has been identified, while developed countries showed tendencies for a negative one. The results are in general robust to the use of different indices for human development, proving the importance of dealing with income disparities regarding economic growth. The empirical results suggest that income inequality does not necessarily hurt economic growth, while human development plays an important role nether less of the influence. (Less)
Please use this url to cite or link to this publication:
author
Heigert, Kilian LU
supervisor
organization
course
NEKP01 20211
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Kuznets curve, panel threshold model, human development, economic growth
language
English
id
9043504
date added to LUP
2021-07-05 13:21:39
date last changed
2021-07-05 13:21:39
@misc{9043504,
  abstract     = {{Theory is still inconclusive to what level income inequality affects economic growth, with little research accounting for the effects of human development. The paper aimed to analyze both the effects of income inequality on growth while controlling for the underlying effects of different human development indicators. This was done by using data of 55 countries for the period 1990-2019, with results being twofold. First, results from the applied panel threshold regression show that there exists a threshold of human development boosting and mitigating effects of income inequality towards economic growth in a beneficial way. Secondly, after splitting the sample into developed and developing countries, a general positive influence of inequality for developing countries has been identified, while developed countries showed tendencies for a negative one. The results are in general robust to the use of different indices for human development, proving the importance of dealing with income disparities regarding economic growth. The empirical results suggest that income inequality does not necessarily hurt economic growth, while human development plays an important role nether less of the influence.}},
  author       = {{Heigert, Kilian}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Effects of Inequality on the Process of Economic Growth and Human Development: A Threshold Analysis}},
  year         = {{2021}},
}