Inequality and economic growth: vicious or virtuous circles?

Menéndez, Ana Jesús López and Cowell, Frank ORCID: 0000-0002-3778-2152 (2013) Inequality and economic growth: vicious or virtuous circles? Revista Galega de Economia, 22 (2). pp. 15-36. ISSN 1132-2799

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Abstract

The relationship between income inequality and economic growth has been widely studied, leading to a controversial debate. Regarding the effect of economic growth on inequality, Kuznets' inver-ted-U hypothesis (1955) suggests that inequality first rises with growth and then falls after a turning point. This model has been extended by Anand and Kanbur (1993), and its empirical applications have provided a wide variety of results, depending on the statistical information, the indicators and the estimation techni-ques. With regard to the effects of inequality on growth, on a theoretical basis the relationship could be of any sign and thus the initial works by Lewis (1954) and Kaldor (1956) defend the existence of positive ef-fects while Alesina & Rodrick (1994), Persson & Tabellini (1994), and Deininger & Squire (1998) assume a negative relationship.The diversity of theoretical assumptions and empirical evidence has stimulated the debate without achieving a consensus about the existence of vicious or virtuous circles. In this context the present paper aims to provide new evidence about the growth-inequality relationship, paying attention to the income level in a double sense. First, we introduce a classification of countries according to their inco-me levels, and second we distinguish between inequality relating to low and high incomes.

Item Type:	Article
Official URL:	http://www.usc.es/econo/RGE/Vol22_ex/castelan/art1...
Additional Information:	© 2013 Universidad de Santiago de Compostela
Divisions:	Economics STICERD Centre for Analysis of Social Exclusion
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
Date Deposited:	20 Nov 2013 15:45
Last Modified:	12 Dec 2024 00:27
URI:	http://eprints.lse.ac.uk/id/eprint/54178

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