Changes or levels? Reassessment of the relationship between top-end inequality and growth
Tuominen, Elina (2016)
Tampereen yliopisto
2016
Johtamiskorkeakoulu - School of Management
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Julkaisun pysyvä osoite on
https://urn.fi/URN:ISBN:978-952-030251-1
https://urn.fi/URN:ISBN:978-952-030251-1
Tiivistelmä
This study explores the association between top-end inequality and subsequent
economic growth. The motivation stems from the results of Banerjee and Duflo
(2003), who study nonlinearities in the inequality–growth relationship and find
that changes in the Gini coefficient, in any direction, are associated with lower
future growth. The current study addresses the issue of nonlinearity and exploits
the top 1% income share series in 25 countries from the 1920s to the 2000s in various
specifications. First, this study finds that the association between the level of top
1% share and growth is more evident in the data than the link between the change
in top 1% share and growth. Second, the main results on the top 1% shares relate
primarily to currently “advanced” economies; a negative association is discovered
between the level of top-end inequality and growth, but this relationship is likely to
become weaker in the course of economic development. Third, this study illustrates
that the sample composition deserves attention in inequality–growth studies.
economic growth. The motivation stems from the results of Banerjee and Duflo
(2003), who study nonlinearities in the inequality–growth relationship and find
that changes in the Gini coefficient, in any direction, are associated with lower
future growth. The current study addresses the issue of nonlinearity and exploits
the top 1% income share series in 25 countries from the 1920s to the 2000s in various
specifications. First, this study finds that the association between the level of top
1% share and growth is more evident in the data than the link between the change
in top 1% share and growth. Second, the main results on the top 1% shares relate
primarily to currently “advanced” economies; a negative association is discovered
between the level of top-end inequality and growth, but this relationship is likely to
become weaker in the course of economic development. Third, this study illustrates
that the sample composition deserves attention in inequality–growth studies.