Does the Impact of Gini Index on Growth Differ among GCC Countries ?

Sbaouelgi, Jihène and Boulila, Ghazi (2016): Does the Impact of Gini Index on Growth Differ among GCC Countries ?

Abstract

This paper tests whether inequality and economic growth in eleven Gulf Cooperation Council (GCC) countries are cointegrated, and estimates the impact of inequality on growth in each country separately in case cointegration exists. Assuming that each country has its own inequality-growth relationship, the paper uses time series data to estimate the impact of inequality on growth individually in each GCC country by making use of single equation cointegration techniques robust to small sample sizes such as dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS) and canonical cointegration regression (CCR). Results show that the impact of inequality on growth differs among GCC countries. The paper is valuable to policy makers in GCC countries, especially the Arab Spring countries, who aim to achieve higher growth rates by improving income inequality. The paper shows whether measures aimed at ameliorating income distribution will positively or negatively affect economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Gulf Cooperation Council countries (GCC), Economic growth; income inequality; Cointegration; Unit root tests
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East

References

Alesina, A. and R. Perotti, [1996]. “Income distribution, political instability, and investment”. European Economic Review, 40: 1203-1228.

Alesina, A. and Rodrik., [1994]. “Distributive, politics and economic growth”. European Economic Review, 55: 345-367

Atkinson. T[2002]«La distribution des revenus dans les pays de l'OCDE au vingtième siècle » Revue française d'économie. Volume 17 N°1, 2002. pp. 3-31.

Atkinson, M. Glaude et L. Olier [2001] « Inégalités économiques », Conseil d'analyse économique, La Documentation française.

Barro, R., [2000]. “Inequality and growth in a panel of countries”. Journal of Economic Growth, 5: 5-32.

Benhabib, J. and M. Spiegel, [1994]. “The role of human capital in economic development: Evidence from aggregate cross-country data”. Journal of Monetary Economics, 34: 143-173.

Bourguignon., [2003]. “The difficult task of expanding the income poverty paradigm”. Paper prepared for the conference on "Conceptual challenges in poverty and inequality analysis", Cornell University, 16-17 April 2002.

Chambers, D. and Krause, A. (2010) Is the relationship between inequality and growth affected by physical and human capital accumulation? Journal of Economic Inequality 8: 153-172. Engle, R. and Granger, C. (1987) Cointegration and error correction: representation, estimation and testing. Econometrica 55: 251-276.

Galor, O. (2011) Inequality, human capital formation and the process of development. NBER Working Paper 17058, May

Granger, C.W. (1981) Some properties of time series data and their use in econometric model specification. Journal of Econometrics 16: 121-30.

Hansen, B. (1992) Tests for parameter instability in regressions with I(1) processes. Journal of Business and Economics Statistics 10: 321-335.

Deininger, K., Squire, L. [1996], “Measuring Income Inequality: a New Data-base”, World Bank economic Review, vol. 10(3), pp. 565–591.

Deininger, K., Squire, L. [1998], “New Ways of Looking at Old Issues: Inequality and Growth”, Journal of Development Economics, vol. 57(2), pp. 259-287.

Forbes. K.J. [2000] “A Reassessment of the Relationship Between Inequality and Growth” American Economic Review, vol 90 : pp. 869-887.

Gastil, R.D., Freedom in the World, (various years).

Galor, Oded and Zeira, Joseph, [1993], “Income Distribution and Macroeconomics,” Review of Economic Studies, 60 35-52.

Hall.R.E. et Jones.C.I. (1999), “Why do some countries produce some much more output per worker than others?”, The Quarterly Journal of Economics, MIT Press , Vol. 114, No. 1, pp.83-116, February 1999.MMM

Kaldor, N.[1956], “Alternative Theories of Distribution,” Review of Economic Studies, 23, 83-100.

Kuznet, S., [1955], “Economic Growth and Income Inequality,” American Economic Review, 45, 1-28.

Levine, R. and Renelt, D. (1992) «Sensitivity Analysis of Cross Country Growth Regressions" American Economic Review, 82: 942-63.

Mankiw, N., D. Romer and D. Weil, [1992]. “A contribution to the empirics of economic growth”. Quarterly Journal of Economics 152: 407-437.

Milanovic, B. 2002, “True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone”, Economic Journal, vol. 112, pp. 51-92.

Mo, Pak Hung, [2000]: “Income Inequality and Economic Growth,” Kyklos, 53, 293-316. Phillips, P. and Hansen, B. (1990) Statistical inference in instrumental variables regressions with I(1) Processes. Review of Economic Studies 57: 99-125.

Quintana, D., and Vicente M. (2012) Agglomeration, inequality and economic growth: cross section and panel data analysis. AQR-AREA - Universidad de Barcelona 690 08034 BCN. Perotti, Roberto, [1994]: “Income Distribution and Investment,” European Economic Review, 38, 827-35.

Piketty. T and Saez. E [2003] “Income Inequality in the United States, 1913- 1998”, Quarterly Journal of Economics, 118(1): 1-39.

Renelt, David Ross Levine;“A Sensitivity Analysis of Cross-Country Growth Regressions” The American Economic Review, Vol. 82, No. 4. (Sep., 1992), pp. 942-963.