Nonlinearity between Inequality and Growth

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Title:	Nonlinearity between Inequality and Growth
Authors:	林淑琴;Lin, Shu-chin;Huang, Ho-chuan;Kim, Dong-hyeon;Yeh,Chih-chuan
Contributors:	淡江大學經濟學系
Date:	2009-05-12
Issue Date:	2011-10-22 17:35:20 (UTC+8)
Abstract:	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.
Relation:	Studies in Nonlinear Dynamics & Econometrics 13(2), pp.1-20
DOI:	10.2202/1558-3708.1635
Appears in Collections:	[Graduate Institute & Department of Economics] Journal Article

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