Measuring Income Inequality and Implications for Economic Transmission Channels

Blotevogel, Robert; Imamoglu, Eslem; Moriyama, Kenji; Sarr, Babacar

doi:10.5089/9781513554501.001

Cited by 7 publications

(4 citation statements)

References 63 publications

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“…Considering six different measures of inequality (three Gini coefficients and three top 10 income shares), a recent study by Blotevogel et al (2020) showed that the choice of the inequality indicator has important implications for the results obtained in empirical analysis, namely, when considering different transmission channels between inequality and growth. In the case of the link between inequality and governance, there is a concern that frequently used measures do not capture interclass inequality, which precludes the testing of the theoretical hypothesis on the effects on democracy that refer to inequality between classes (Houle 2015).…”

Section: Concept and Measurement Of Inequalitymentioning

confidence: 99%

On the impact of inequality on growth, human development, and governance

Ferreira¹,

Gisselquist²,

Tarp³

2021

WIDER Working Paper

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Countering recent rises in many countries of inequality in income and wealth is widely recognized as a major development challenge. This is so from an ethical perspective and because greater inequality is perceived to be detrimental to key development aims. Still, an informed debate on the effects of inequality requires clear evidence. This review contributes to the literature by taking stock and providing an overview of current knowledge of the impact of income inequality on three important outcomes: economic growth, health and education as two dimensions of human development, and governance, with a focus on democracy. Drawing on the insights from different disciplines and considering recent work, it reveals that existing evidence provides somewhat mixed results and argues for a need for further in-depth empirical work. It also points to explanations for the lack of consensus embedded in data quality and availability, measurement issues, and the shortcomings of the different methods employed. Finally, we point to promising future research avenues relying on experimental work for micro level analysis, more region- and country-specific studies, and reiterate the need for improvements in the availability and reliability of data.

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Section: Concept and Measurement Of Inequalitymentioning

confidence: 99%

On the impact of inequality on growth, human development, and governance

Ferreira¹,

Gisselquist²,

Tarp³

2021

WIDER Working Paper

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“…The negative channels are related to imperfect capital markets (Banerjee and Newman, 1993;Galor and Zeira, 1993), political economy issues (Alesina and Rodrik, 1994;Stiglitz, 2012), and the development process (Dasgupta and Ray, 1986). An additional complication is that estimated channels may change over time (Blotevogel et al, 2020). 2 In the literature on inequality of opportunity, a similar hypothesis (in terms of inequality of opportunity and inequality of effort) has been named the "cholesterol hypothesis" (Ferreira, 2007).…”

Section: Introductionmentioning

confidence: 99%

Unfair inequality and growth*

Marrero

Rodríguez

2023

Scandinavian J Economics

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Fighting against economic inequality is one fundamental social goal in the agendas of most governments. However, recent studies highlight that people actually prefer unequal societies, as they accept inequality generated by an individual's effort and wish to reduce only unfair inequality (generated by factors beyond an individual's control). This distinction might help to explain the fundamental unsolved question about whether inequality is good or bad for growth: unfair inequality (UI) could be growth‐deterring, while fair inequality (FI) might be growth‐enhancing. We derive a reduced‐form growth equation from a stylized overlapping‐generations model with human capital that includes FI, UI, and poverty. Then, using an instrumental variable approach, we show for alternative samples and inequality measures at the worldwide level that the estimated coefficient associated with UI is always negative, while the coefficient of total inequality increases when UI is included in the regression. Moreover, we find that poverty mediates this relationship because the higher the poverty rate, the smaller the impact of either type of inequality on growth.

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“…Compounding these issues, data on poverty and inequality have been difficult to compile, are collected and measured infrequently, and are often unreliable. Estimates are sensitive to assumptions on factors such as capital gains and untaxed income (Cerra et al 2021, Chapter 1) and alternative measures may show different trends (Blotevogel et al 2020). Empirical studies, especially those exploring the link between growth and inequality, sometimes find inconsistent results, no doubt due to these multiple channels, endogenous relationships, and poor data quality.…”

Section: Introductionmentioning

confidence: 99%

Links Between Growth, Inequality, and Poverty: A Survey

Cerra¹,

Loayza²,

Lama³

2021

IMF Working Papers

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Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.

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Measuring Income Inequality and Implications for Economic Transmission Channels

Cited by 7 publications

References 63 publications

On the impact of inequality on growth, human development, and governance

On the impact of inequality on growth, human development, and governance

Unfair inequality and growth*

Links Between Growth, Inequality, and Poverty: A Survey

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