Inequality and Growth: A Heterogeneous Approach
DOI:
https://doi.org/10.25071/1874-6322.40425Keywords:
heterogeneity, income inequality, growth, regions, institutional quality, panel VARAbstract
This article tests for cross-country convergence in income inequality and
estimates its impact on growth with a heterogeneous Panel Structural Vector
AutoRegression model, which addresses some empirical challenges plaguing
the literature. We find that income inequality is converging across countries,
and that its impact on growth is heterogeneous. While the median response of
real per capita Gross Domestic Product (GDP) growth to income inequality
shocks is negative and significant, at least one fourth of the sample presents a
positive effect. Also, we find evidence that improved institutional frameworks
can reduce the negative effect of income inequality on growth.