Effects of Income Inequality on Growth through Efficiency Improvement and Capital Accumulation.

Yamamura, Eiji and Shin, Inyong (2008): Effects of Income Inequality on Growth through Efficiency Improvement and Capital Accumulation.

Abstract

In the present paper, the inverted-U shape relationship between growth and inequality found in Chen(2003), is reexamined. We decompose productivity growth into efficiency improvement, capital accumulation and technological progress and then ascertain their determinants by employing a fixed effects and dynamic panel models. In particular, this paper focuses on the question of how economic inequality affects capital accumulation and efficiency improvement. Key findings are that inequality enhances efficiency improvement as well as capital accumulation and then undermines them as inequality widens. However, other factors such as human capital, openness, and government consumption have different effects on them.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inequality, Growth, Fixed effects
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

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