Nonlinearity between Inequality and Growth
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Shu-Chin Lin
The existing literature shows that income inequality plays an important role in growth process, and such a relationship is better characterized as nonlinearity. The paper revisits the issue by employing the threshold regressions with instrumental variables approach. Using the initial level of economic development as a threshold variable, we find strong evidence in support of a nonlinear income threshold in the relationship. In particular, the data show that an increase in inequality would hinder growth in low-income countries but accelerate growth in high-income ones. The results therefore suggest that redistributive policy that alleviates inequality can foster economic growth in low-income countries, while policymakers confront a tradeoff between inequality and growth in high-income countries.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Article
- A Component GARCH Model with Time Varying Weights
- The J2 Status of "Chaos" in Period Macroeconomic Models
- Nonlinearity between Inequality and Growth
- Testing for Conditional Heteroscedasticity in the Components of Inflation
- Discovering Hidden Structures Using Mixture Models: Application to Nonlinear Time Series Processes
- Finite Sample Theory of QMLEs in ARCH Models with an Exogenous Variable in the Conditional Variance Equation
Artikel in diesem Heft
- Article
- A Component GARCH Model with Time Varying Weights
- The J2 Status of "Chaos" in Period Macroeconomic Models
- Nonlinearity between Inequality and Growth
- Testing for Conditional Heteroscedasticity in the Components of Inflation
- Discovering Hidden Structures Using Mixture Models: Application to Nonlinear Time Series Processes
- Finite Sample Theory of QMLEs in ARCH Models with an Exogenous Variable in the Conditional Variance Equation
