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Does income inequality matter for economic growth? : An empirical investigation

Chletsos, Michael and Fatouros, Nikolaos (2016): Does income inequality matter for economic growth? : An empirical investigation.

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Abstract

In this paper we empirically investigate a possible effect of income inequality on growth. Using a panel of 126 countries for the time-span from 1968 to 2007 we report a positive relationship between income inequality and growth. That occurs through both the taxation and the human capital channels. We estimate our model with several estimation techniques such as fixed effects, GMM and Two stages least squares. Our results suggest that a policy maker has to take into account a certain trade off between making the distribution of income more equal and raising the economy's wealth.

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