Income Inequality and Economic Growth: Evidence from American Data

IADB Working Paper No. 404

31 Pages Posted: 25 Oct 1999

See all articles by Ugo Panizza

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; CEPR

Multiple version iconThere are 2 versions of this paper

Date Written: August 1999

Abstract

Cross-country studies have found a negative relationship between income inequality and economic growth. The main problem with the cross-country analyses is the poor quality of the data on income distribution. This paper tests the robustness of the cross-country results to the use of a more accurate cross-state data-set. Data from the US states confirm the negative relationship between income inequality and growth. The same data-set is used to run structural estimations aimed at testing several possible channels linking inequality to growth. Although the results are not as strong as in the case of the reduced form estimations, the paper finds some evidence in support of a fiscal channel linking inequality to growth.

JEL Classification: D31, E62, P16, O41, I22

Suggested Citation

Panizza, Ugo, Income Inequality and Economic Growth: Evidence from American Data (August 1999). IADB Working Paper No. 404, Available at SSRN: https://ssrn.com/abstract=178708 or http://dx.doi.org/10.2139/ssrn.178708

Ugo Panizza (Contact Author)

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

CEPR ( email )

London
United Kingdom

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