Is the relationship between inequality and growth affected by physical and human capital accumulation?

Chambers, Dustin; Krause, Alan

doi:10.1007/s10888-009-9111-x

Cited by 41 publications

(25 citation statements)

References 23 publications

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“…Equality alleviates human capital accumulation and thus stimulates the growth process. Chambers and Krause [7] empirically test this model and find that the data overall support the hypotheses of Galor and Moav. De la Croix and Doepke [10] also focus on the importance of human capital.…”

Section: Introductionmentioning

confidence: 83%

Inequality and growth: evidence from panel cointegration

2011

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This paper uses heterogeneous panel cointegration techniques to estimate the long-run effect of income inequality on per-capita income for 46 countries over the period 1970-1995. We find that inequality has a negative long-run effect on income, both for the sample as a whole and for important sub-groups within the sample (developed countries, developing countries, democracies, and non-democracies). The effect is economically important, with a magnitude about half as high as the magnitude of an increase in the investment share.

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Section: Introductionmentioning

confidence: 83%

Inequality and growth: evidence from panel cointegration

2011

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“…This approach to sensitivity analysis is illustrated by them (see their Appendix) and is also taken recently by, for example, Castelló-Climent (2010). The approach may be contrasted with the dummy variable adjustments by Klasen (2008, 2012) and Teulings and van Rens (2008), or the manual adjustments to the same effect by Chambers and Krause (2010). I discuss such adjustments further below.…”

Section: The Implications Of the Differencesmentioning

confidence: 99%

“…Much-cited papers by Barro (2000) and Forbes (2000) examined this question using the Deininger-Squire (1996) data. Barro (2008) revisited the topic using an early version of the WIID and later versions have been employed more recently by Berg et al (2012), Castelló-Climent (2010), and Chambers and Krause (2010). A February 2014 study by IMF researchers (Ostry et al 2014), finding that lower inequality was correlated with faster growth, and which received much media publicity, drew on SWIID for its inequality data.…”

Section: Introductionmentioning

confidence: 99%

World income inequality databases: an assessment of WIID and SWIID

2015

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This article assesses two secondary data compilations about income inequality -the World Income Inequality Database (WIIDv2c), and the Standardized World Income Inequality Database (SWIIDv4.0) which is based on WIID but with all observations multiply-imputed. WIID and SWIID are convenient and accessible sources for researchers seeking crossnational data with global coverage for relatively long time periods. Against these undoubted benefits must be set costs arising from lack of data comparability and quality and also, in the case of SWIID, questions about its imputation model. WIID and SWIID users need to recognize this benefit-cost trade-off and ensure their substantive conclusions are robust to potential data problems. I provide detailed description of the nature and contents of both sources plus illustrative regression analysis. From a data issues perspective, I recommend WIID over SWIID, though my support for use of WIID is conditional.JEL codes: C81, C82, D31

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“…This paper is the first among studies conducting an empirical investigation of the GM () “unified” theory of inequality and growth, which does so using a multiplicative interaction model in a single country framework. Only Chambers and Krause () test the GM theory, albeit in a cross section of countries, and support its implications. We place the spotlight on the possible nonlinear effect of inequality on growth due to its dependence on physical and human capital stocks, as GM argue.…”

Section: Introductionmentioning

confidence: 99%

Inequality and Growth in the United States: Why Physical and Human Capital Matter

Benos

Karagiannis²

2017

Economic Inquiry

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We investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation, using an annual panel of U.S. state‐level data. Our analysis is based upon the “unified” framework offered by Galor and Moav (2004) while the empirics account for cross‐section dependence, parameter heterogeneity, and endogeneity, in nonstationary series. We conclude that changes in inequality do not influence growth, neither in the short run nor in the long run in the United States as a whole in the 1929–2013 period. Our findings are robust to the inclusion of overall income inequality measures. These findings provide support for the theoretical prediction of the unified theory of inequality and growth, according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the United States experiences during our period of investigation. Therefore, future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the United States. (JEL I21, O47, C23)

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Is the relationship between inequality and growth affected by physical and human capital accumulation?

Abstract: Capital-skill complementarity, Economic growth, Income inequality,

Cited by 41 publications

References 23 publications

Inequality and growth: evidence from panel cointegration

Inequality and growth: evidence from panel cointegration

World income inequality databases: an assessment of WIID and SWIID

Inequality and Growth in the United States: Why Physical and Human Capital Matter

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