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Inequality and Growth: From Micro Theory to Macro Empirics

Author

Listed:
  • N. GOBBIN
  • G. RAYP
  • D. VAN DE GAER
Abstract
To establish the nature of the link between income distribution and economic growth by means of a standard growth regression, one needs to collapse an entire income distribution into a scalar measure of inequality. Due to data shortages macro-economic research has typically been forced to use the gini coefficient for this purpose. Using a simulation set up we check how well different measures of inequality or poverty succeed in detecting the correct relationship. We find that the gini coefficient might not be the worst of choices, but the comparison of the explanatory power of different inequality measures can help to identify the theoretical mechanism through which inequality affects growth.

Suggested Citation

  • N. Gobbin & G. Rayp & D. Van De Gaer, 2004. "Inequality and Growth: From Micro Theory to Macro Empirics," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/258, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:04/258
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    References listed on IDEAS

    as
    1. Assar Lindbeck, 1993. "The Welfare State," Books, Edward Elgar Publishing, number 1003.
    2. Pedro H. Albuquerque, 2004. "Inequality-Driven Growth: Unveiling Aggregation Effects in Growth Equations," Econometric Society 2004 Far Eastern Meetings 769, Econometric Society.
    3. Niko Gobbin & Glenn Rayp, 2004. "Inequality and Growth: Does Time Change Anything," Development and Comp Systems 0402005, University Library of Munich, Germany.
    4. Assar Lindbeck, 1993. "The Selected Essays of Assar Lindbeck," Books, Edward Elgar Publishing, volume 0, number 287.
    5. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    6. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
    7. Viaene, J.-M. & Zilcha, I., 2001. "Human Capital Formation, Income Inequality and Growth," Papers 2001-13, Tel Aviv.
    8. Atkinson, A.B. & Brandolini, A., 2000. "Promise and Pitfalls in the Use of 'Secondary' Data -Sets: Income Inequality in OECD Countries," Papers 379, Banca Italia - Servizio di Studi.
    9. repec:aia:aiaswp:wp14 is not listed on IDEAS
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    Cited by:

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    2. Jürgen Faik, 2012. "Impacts of an Ageing Society on Macroeconomics and Income Inequality: The Case of Germany since the 1980s," SOEPpapers on Multidisciplinary Panel Data Research 518, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Michal Brzezinski, 2013. "Income Polarization and Economic Growth," LIS Working papers 587, LIS Cross-National Data Center in Luxembourg.
    4. Bruce E. Kaufman, 2010. "Institutional Economics and the Minimum Wage: Broadening the Theoretical and Policy Debate," ILR Review, Cornell University, ILR School, vol. 63(3), pages 427-453, April.
    5. Michel Dumont & Nikolina Stojanovska & Ludo Cuyvers, 2011. "World inequality, globalisation, technology and labour market institutions," International Journal of Manpower, Emerald Group Publishing Limited, vol. 32(3), pages 257-272, June.
    6. F Marchionne & S Parekh, 2015. "Growth, Debt, and Inequality," Economic Issues Journal Articles, Economic Issues, vol. 20(2), pages 67-94, September.

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    More about this item

    Keywords

    income inequality; economic growth; inequality measures; poverty measures; simulation;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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