Inequality, poverty and economic growth

Breunig, Robert; Majeed, Omer

doi:10.1016/j.inteco.2019.11.005

Cited by 108 publications

(86 citation statements)

References 26 publications

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“…Furthermore, empirical evidence supports a positive relationship between income inequality and economic growth. Breunig and Majeed (2020) link the relationship between economic growth and income inequality with the poverty level. They observe that as the poverty level is increasing, the negative impact of inequality on economic growth is rising.…”

Section: Economic Growth and Income Inequalitymentioning

confidence: 99%

Linkage between Financial Development and Income Inequality in India

Sharma¹,

Dahiya²

2020

Preprint

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A sound financial system is a prerequisite for the inclusive and stable development of an economy, especially it plays a key role in dealing with the menace of inequality in income distribution. Economic policies including monetary and fiscal policy framed by the policymakers influence the accessibility to the financial resources by the poor. This study intends to examine the relationship between financial development and income inequality in India over the period 1973 to 2015. To analyze this relationship, the financial development index was constructed using the PCA approach. The study also checks the presence of the Greenwood–Jovanovich (GJ) hypothesis in the Indian economy. In this study, the ARDL Bound testing procedure is followed to assess the impact of financial development on income inequality. Besides financial development, the impact of economic development and government expenditure is also observed. Results confirm the existence of an inverted U-shaped linkage between financial development and income inequality in India, whereas economic development deteriorates the gap between the income of poor and rich. Furthermore, a U-shaped relationship between government expenditure and income inequality is revealed in this study. The findings of this study may provide new insight to the policymakers for framing suitable economic policies to encourage sustainable development in India.

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Section: Economic Growth and Income Inequalitymentioning

confidence: 99%

Linkage between Financial Development and Income Inequality in India

Sharma¹,

Dahiya²

2020

Preprint

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“…A rise in poverty levels re ects the fall in people's income that either pushes them into an impoverishment situation, or into a poverty trap (e.g., Barrett and Carter, 2013;Barrett et al 2016;Dutta and Kumar, 2016;Naschold, 2013). Thus, the lack of resources to satisfy the minimum basic necessities of life (i.e., poverty) results in lower consumption growth (e.g., Blocker et al, 2013;Chakravarti, 2006;Ravallion, 2012), and particularly, in lower investment in human capital, including education and health (e.g., Azariadis and Stachurski, 2005;Bain et al 2013;Hanson et al 2013;Haushofer and Fehr, 2014;Hill and Sandfort, 1995;López, 2006;Mullainathan and Sha r, 2013;Sachs, 2005), and a less productive workforce (e.g., Breunig and Majeed, 2020;Hill and Sandfort, 1995). Therefore, we rst postulate that the effect of poverty on the real exchange rate (i.e., the relative price of the non-tradables to tradables) would depend on how its effect on consumption would in uence the demand for tradables relatively to non-tradables.…”

Section: Discussion On the Effect Of Poverty On The Real Exchange Ratementioning

confidence: 99%

“…This is not surprising because the literature on the macroeconomic effects of poverty is relatively limited. This literature includes for example, studies on human capital effect of poverty (e.g., Azariadis and Stachurski, 2005;Bain et al 2013;Haushofer and Fehr, 2014); effect of poverty on economic growth (e.g., Breunig and Majeed, 2020;López and Servén, 2015;Ravallion, 2012); on trade openness (Gnangnon, 2019a); and on export product diversi cation (Gnangnon, 2019b).…”

Section: Introductionmentioning

confidence: 99%

Effect of Poverty on Real Exchange Rate in Developing Countries

Gnangnon¹

2020

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A strand of the literature has shown that a depreciation of the real exchange rate contributes to poverty reduction. The current paper considers the issue in the other way around, by investigating whether poverty matters for the dynamics of real exchange rate. The analysis has been performed using a panel dataset of 106 countries over the period 1980-2017, and relied on the two-step system Generalized Methods of Moments (GMM). The findings are quite interesting. A rise in the level of poverty is associated with an appreciation of the real exchange rate over the full sample. However, countries with a high real per capita income experience a real exchange rate depreciation effect of poverty, while for countries with a relatively low real per capita income (such as poor countries), poverty is associated with an appreciation of the real exchange rate. Furthermore, poverty exerts an appreciation of the real exchange rate in countries with a low degree of trade openness (including trade policy liberalization), a low level of workers' productivity, and a high degree of export product concentration.

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“…In this regard, Perry et al (2006) have noted that the absence of a well-developed nancial markets enhances the negative investment and economic growth effects of poverty. All these contribute to constraining investments in the economy, result in a less productive workforce (e.g., Breunig and Majeed, 2020;Hill and Sandfort, 1995), and ultimately hurt economic growth. Ravallion (2002) has shown that poverty reduces consumption growth, and leads to a less poverty-reducing economic growth.…”

Section: Theoretical Discussion On How Poverty Volatility Can Affect mentioning

confidence: 99%

“…However, a limited empirical literature has looked at the macroeconomic effects of poverty. For example, some studies have examined the effect of poverty on human capital (e.g., Azariadis and Stachurski, 2005;Bain et al 2013;Bowles et al, 2006;Haushofer and Fehr, 2014;Perkins et al, 2012) and on economic growth (e.g., Bagchi and Svejnar, 2015;Breunig and Majeed, 2020;López and Servén, 2015;Ravallion, 2002Ravallion, , 2012. Others have focused on the effect of poverty on economic development (e.g., Mehanna, 2004;Nakabashi, 2018), export product diversi cation (Gnangnon, 2019a), and trade openness (Gnangnon, 2019b).…”

Section: Introductionmentioning

confidence: 99%

Effect of Poverty Volatility on Tax Revenue Instability in Developing Countries

Gnangnon

2020

Preprint

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This paper complements the relatively few existing studies on the macroeconomic effects of poverty in developing countries, by investigating the effect of poverty volatility on tax revenue instability. The empirical analysis has been conducted using an unbalanced panel dataset of 112 developing countries covering the period 1980-2017, and primarily the two-step system Generalized Method of Moments technique. Findings have revealed that, on average, over the full sample, poverty volatility is associated with lower tax revenue instability. However, this reflects differentiated effect across countries, as low-income countries tend to experience a positive tax revenue instability effect of poverty volatility, while poverty volatility results in lower tax revenue instability in relatively advanced countries (among developing countries). Additionally, these outcomes hide the fact that poverty volatility exerts a higher positive effect on tax revenue instability in the context of increasing poverty rates. From a policy perspective, this analysis shows that it is essential for policymakers to dampen the volatility of poverty rates (notably in countries with high poverty rates) if they were to ensure the stability of tax revenue or reduce its instability, given the adverse effect of tax revenue instability on economic growth.

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Inequality, poverty and economic growth

Cited by 108 publications

References 26 publications

Linkage between Financial Development and Income Inequality in India

Linkage between Financial Development and Income Inequality in India

Effect of Poverty on Real Exchange Rate in Developing Countries

Effect of Poverty Volatility on Tax Revenue Instability in Developing Countries

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