Income Inequality and Economic Growth: Heterogeneity and Nonlinearity

2019 ◽  
Vol 24 (3) ◽  
Author(s):  
Abebe Hailemariam ◽  
Ratbek Dzhumashev
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Measurement Errors ◽  
Developing Economies ◽  
Threshold Effect ◽  
Growth Effect ◽  
Developed Economies ◽  
Nonlinear Growth ◽  
Cross Country ◽  
The Relationship

AbstractThis paper examines the relationship between income inequality and economic growth in a broad panel of countries over the period from 1965 to 2014. We utilize an improved dataset for inequality with reduced measurement errors, which fosters cross-country comparability. In addition, we investigate whether accounting for heterogeneity across countries alters the estimated effect of inequality on growth, and whether the inequality-growth nexus varies with the level of income inequality. Our estimates show that after accounting for heterogeneity, the nonlinear growth effect of income inequality remains statistically and economically significant. We find a threshold effect of inequality on economic growth, and this threshold is higher for developing economies than for developed economies.

scholarly journals Volatility in Discretionary Public Spending and Economic Growth: A Cross Country Analysis

2020 ◽  
Vol 59 (1) ◽  
pp. 45-68
Author(s):  
Muhsin Ali ◽  
Karim Khan
Keyword(s):  
Economic Growth ◽  
Economic Performance ◽  
Developing Economies ◽  
Public Spending ◽  
Jel Classification ◽  
Developed Economies ◽  
Potential Control ◽  
Country Analysis ◽  
Cross Country ◽  
The Impact

Volatility in discretionary public spending has diverse implications for the overall economic performance of economies. In this study, we examine the impact of volatile non�systematic discretionary public spending on economic growth. By employing cross-country data of 74 developed and developing economies, we find that volatility in non-systematic discretionary public spending has an adverse impact on economic growth. In particular, such impact is severe in the case of less developed economies. Our findings are robust to the problem of endogeneity. In order to ensure the accuracy of the results, we conduct sufficient sensitivity analysis by incorporating a bunch of potential control variables. In most of the cases, the results with regard to the policy volatility remain intact. This suggests that effective spending rules, i.e. permanent numerical limits, should be imposed on budgetary aggregates to restrain governments from the volatile use of discretionary spending. JEL Classification: H3; H5 Keywords: Volatility in Discretionary Public Spending, Economic Growth, Effective Spending Rule

scholarly journals Monetary Policy and Economic Growth: A Review of International Literature

2018 ◽  
Vol 7 (2) ◽  
pp. 123-137 ◽  
Author(s):  
Enock Nyorekwa Twinoburyo ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Financial Markets ◽  
Developing Economies ◽  
Developed Economies ◽  
Long Run ◽  
Wide Range ◽  
Short Run ◽  
Theoretical Evolution ◽  
The Relationship

Abstract This paper aims to survey the existing literature, both theoretical and empirical, on the relationship between monetary policy and economic growth. While there has been a wide range of studies on the existing relationship between monetary policy and economic growth, the nexus between the two remains inconclusive. This paper takes a comprehensive view of the theoretical evolution of the relationship and the respective recent empirical findings. Overall, this paper shows that the majority of findings support the relevancy of monetary policy in supporting economic growth, mainly in financially developed economies with fairly independent central banks. The relationship tends to be weaker in developing economies with structural weaknesses and underdeveloped financial markets that are weakly integrated into global markets. This paper concludes that monetary policy matters for growth both in the short-run and long-run despite the prevailing ambiguous relationship. The paper recommends intensive financial development measure for developing countries as well as structural reforms to address to supply side deficiencies.

scholarly journals Public Debt and Economic Growth Nexus: Evidence from South Asia

2018 ◽  
Author(s):  
Saira Saeed ◽  
Tanweer Islam
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
South Asia ◽  
Public Debt ◽  
Developing Economies ◽  
Threshold Effect ◽  
The Public ◽  
Threshold Levels ◽  
Literature Evidence ◽  
The Relationship

It is well established in literature that the public debt and economic growth bear positive and non-linear relationship. However, in recent literature, evidence of no causal relationship is found when accounted for endogeneity in case of advanced economies (Panizza & Presbitero, 2014). Chudik, Mohaddes, Pesaran, & Raissi, (2017) analyse the data on forty countries and find no evidence of universally applicable threshold effect in the relationship between debt and growth. These advancements in the debt-growth literature provides the motivation to re-explore the relationship between public debt and economic growth under non-linearity and endogeneity in context of developing economies of South Asia including Pakistan, India, Bangladesh and Sri-Lanka for the period 1980-2014. There exists a significant, positive but nonlinear relationship between the public debt and economic growth for the selected set of developing countries when accounted for endogeneity and non-linearity. The negative association between the public debt and economic growth for SAARC region is found when the debt level is higher than 61% of GDP which is quite lower than developed economies (90% of GDP). Individual threshold levels for debt-to-GDP ratio divulge that Sri Lanka, Pakistan and India need to control their public borrowings as their current debt levels are higher and/or around the respective threshold levels.

Growth quality and income inequality: cross-country analysis

2021 ◽  
Vol 17 (4) ◽  
pp. 454-461
Author(s):  
Bulat Khusainov ◽  
Asset Nussupov
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Negative Impact ◽  
Time Lag ◽  
National Income ◽  
Income Levels ◽  
Cross Country ◽  
The Impact ◽  
The Relationship

The article is devoted to the construction and implementation of an econometric model for quantitative assessment of the impact of cross-country, international, and national income inequality on the dynamics and quality of growth of four groups of countries with different levels of development. A substantial analysis of numerous Russian and foreign research that discover the dynamics and quality of growth was carried out. On this basis, we conclude that income inequality is an important characteristic of the quality of growth of both the national and global economies. To study the relationship between inequality and economic growth, the research uses two concepts proposed by the World Bank – cross-country and international inequality. The distinction of this study from all other known works is not in identifying the genesis of the phenomenon of «inequality», but in focusing on the development of concepts of inequality between countries and quantity assessment of their impact on the growth of economies with different income levels (high, above average, below average and low). This development contributes to the expansion of the research landscape that analyses the relationship between economic growth and inequality. The implementation of the constructed model of cross-country regression confirmed the assumption on the negative impact of three types of inequality on countries with different income levels. At that, the degree of their influence for four groups of countries is shown with a different time lag. The statistically significant empirical results are the convincing scientific basis for evidence-based policy while developing an adequate economic policy by national governments, especially in modern conditions

Financial Intermediation and Growth: Theory and Some Cross-Country Evidence

1997 ◽  
Vol 36 (4II) ◽  
pp. 855-862
Author(s):  
Tayyeb Shabir
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Intermediation ◽  
Empirical Estimates ◽  
Financial Liberalisation ◽  
Cross Country ◽  
Level Of Significance ◽  
The Relationship ◽  
Positive Effect ◽  
Theoretical Developments

Well-functioning financial markets can have a positive effect on economic growth by facilitating savings and more efficient allocation of capital. This paper characterises some of the recent theoretical developments that analyse the relationship between financial intermediation and economic growth and presents empirical estimates based on a model of the linkage between financially intermediated investment and growth for two separate groups of countries, developing and advanced. Empirical estimates for both groups suggest that financial intermediation through the efficiency of investment leads to a higher rate of growth per capita. The relevant coefficient estimates show a higher level of significance for the developing countries. This financial liberalisation in the form of deregulation and establishment and development of stock markets can be expected to lead to enhanced economic growth.

A NOTE ON INFLATION, ECONOMIC GROWTH, AND INCOME INEQUALITY

2009 ◽  
Vol 13 (1) ◽  
pp. 138-147 ◽  
Author(s):  
Yi Jin
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Income Inequality ◽  
Endogenous Growth ◽  
Money Growth ◽  
Relative Importance ◽  
Long Run ◽  
Endogenous Growth Model ◽  
The Relationship ◽  
Negative Growth

This paper develops a monetary endogenous growth model with capital and skill heterogeneity to analyze the relationship among inflation, growth, and income inequality. In the model inflation, growth, and inequality are jointly determined. We show that an increase in the long-run money growth rate raises inflation and reduces growth, but its effect on income inequality depends on the relative importance of the two types of heterogeneity. Inequality shrinks with the rise of inflation when capital heterogeneity dominates and enlarges when skill heterogeneity dominates. Therefore, our model supports a negative (positive) inflation–inequality relationship and a positive (negative) growth–inequality relationship when capital (skill) heterogeneity dominates. In any event, inflation and growth are negatively related.

scholarly journals Economic Growth and Income Inequality in Developing Countries

2015 ◽  
Vol 9 (6) ◽  
pp. 79-82 ◽  
Author(s):  
Morteza Nemati ◽  
Ghasem Raisi
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Income Inequality ◽  
Income Distribution ◽  
Economic System ◽  
Development Strategy ◽  
Low Income ◽  
Poverty Eradication ◽  
The Relationship ◽  
Selection Of

Nowadays, improvement in income distribution and poverty eradication and hence low inequality are served as the main objectives of economic and social development strategy even prior than primary tasks of governments. to manifest importance of income distribution, some economists adopt income inequality and income distribution in society as criteria for economic system of the community, although these criteria and measures are theoretical for the economic system and this varies from the perspective of different people, however, it denotes on  importance of income distribution among individuals. The main objective of this study was to evaluate the effect of economic growth on income inequality in the selection of low-income developing countries.To this end, using panel data and data for 28 developing countries over the period 1990-2010 the relationship between GDP and the Gini coefficient was examined. The results indicate that as per hypothesis Kuznets in the early stages of growth, income inequality increases and then it declines in later stage.

scholarly journals How do Poverty and Income Inequality affect Economic Growth in Developing Countries?

2021 ◽  
Vol 4 (2) ◽  
pp. 547-558
Author(s):  
Hamza Saleem ◽  
Fatima Farooq ◽  
Muhammad Aurmaghan
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Panel Data ◽  
Income Inequality ◽  
Negative Impact ◽  
Positive Impact ◽  
Development Indicators ◽  
The Relationship ◽  
Positive Effect ◽  
World Development

The major objective of this research is to examine the relationship between poverty, income inequality and economic growth from some selected developing countries. This study uses panel data for the period of 2002-2015. All the data is taken from world development indicators (WDI). To find out the results, we have used Hausman test an econometrics technique for panel data in this research. The results of the study indicate that poverty and income inequality have a negative impact on economic growth on the other hand Gross capital formation, labor force, total population and government consumption and expenditure have a positive impact on economic growth. The result tells us that changes in these variables have a significant and positive effect on the dependent variable. To achieve the goal of economic growth developing countries should reduce poverty and take meaningful steps to overcome the problem of inequality in the society which can be very helpful in achieving the goal of economic growth.

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