Is it the Income Distribution or Redistribution that Affects Growth?
30 Pages Posted: 17 Mar 2012
Date Written: 2012
Abstract
This study addresses the central question in political economy how the objectives of attaining welfare and restricting income inequality are related to each other. Thus far few studies scrutinise whether income inequality as such, or the redistributing public interventions to equalise incomes affect economic growth. This study aims to fill this gap using a panel design covering 30 OECD countries. Taking into account the limited data availability, this study finds a negative association between redistribution and growth that remains significant when the level of inequality is held constant. No evidence is found for a relationship between income inequality and growth. This finding is in line with the trade-off hypothesis, holding that redistribution limits the financial incentives to gain wealth, leading to lower output growth. Yet, the found association is small, and a causal interpretation of the negative association between redistribution and growth does not seem to be warranted.
Keywords: income inequality, redistribution, economic growth, trade-off
JEL Classification: O11, E25, H23
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Income Inequality and Economic Growth: Evidence from American Data
By Ugo Panizza
-
Income Inequality and Economic Growth: Evidence from the American Data
By Ugo Panizza
-
Regional Convergence in the European Union (1985-1999): A Spatial Dynamic Panel Analysis
By Harald Badinger, Werner G. Müller, ...