Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v38y2005i4p1272-1297.html
   My bibliography  Save this article

What drives the cross‐country growth and inequality correlation?

Author

Listed:
  • Debasis Bandyopadhyay
  • Parantap Basu
Abstract
. We present a neo‐classical model that explores the determinants of growth‐inequality correlation and attempts to reconcile the seemingly conflicting evidence on the nature of the growth‐inequality relationship. The initial distribution of human capital determines the long‐run income distribution and the growth rate by influencing the occupational choice of the agents. The steady‐state proportion of adults that innovates and updates human capital is path dependent. The output elasticity of skilled‐labour, barriers to knowledge spillovers, and the degree of redistribution determine the range of steady‐state equilibria. From a calibration experiment we report that a skill‐intensive technology, low barriers to knowledge spillovers, and high degrees of redistribution characterize the industrial countries with a positive growth‐inequality correlation. A negative correlation between growth and inequality arises for the group of non‐industrial countries with the opposite characteristics. JEL classification: E1, O4 Qu’est‐ce qui sous‐tend la corrélation transversale entre la croissance des pays et son niveau d’inégalité? On présente un modèle néo‐classique qui explore les déterminants de la corrélation croissance‐inégalité et on tente de réconcilier les résultats qui semblent contradictoires à ce propos. La distribution initiale de capital humain détermine la distribution des revenus à long terme et le taux de croissance en influant sur le choix occupationnel des agents. En régime permanent, la proportion des adultes qui innovent et améliorent le capital humain dépend du sentier d’origine. L’élasticité de la production par rapport au travail qualifié, les barrières aux effets de débordement de la connaissance, et le degré de redistribution déterminent le corridor des équilibres en régime permanent. A partir d’une expérience de calibration, il appert qu’une technologie à forte intensité de compétences, des barrières faibles aux effets de débordement de la connaissance, et beaucoup de redistribution sont des éléments qui caractérisent les pays où la corrélation croissance‐inégalité est positive. Une corrélation négative émerge dans le groupe de pays non industrialisés qui a les caractéristiques inverses.

Suggested Citation

  • Debasis Bandyopadhyay & Parantap Basu, 2005. "What drives the cross‐country growth and inequality correlation?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1272-1297, November.
    • Handle: RePEc:wly:canjec:v:38:y:2005:i:4:p:1272-1297
    DOI: 10.1111/j.0008-4085.2005.00325.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0008-4085.2005.00325.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0008-4085.2005.00325.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-1198, December.
    2. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
    5. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
    6. Bandyopadhyay, Debasis, 1997. "Distribution of Human Capital and Economic Growth," Working Papers 157, Department of Economics, The University of Auckland.
    7. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    8. Debasis Bandyopadhyay & Parantap Basu, 2001. "Redistributive Tax and Growth in a Model with Discrete Occupational Choice," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 111-132, June.
    9. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    10. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    11. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    12. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
    13. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    14. Roland Benabou, 2002. "Tax and Education Policy in a Heterogeneous-Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?," Econometrica, Econometric Society, vol. 70(2), pages 481-517, March.
    15. Freeman, Scott, 1996. "Equilibrium Income Inequality among Identical Agents," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1047-1064, October.
    16. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 151-172.
    17. World Bank, 2002. "World Development Indicators 2002," World Bank Publications - Books, The World Bank Group, number 13921.
    18. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    19. Amparo Castello & Rafael Domenech, 2002. "Human Capital Inequality and Economic Growth: Some New Evidence," Economic Journal, Royal Economic Society, vol. 112(478), pages 187-200, March.
    20. Banerjee, Abhijit V & Duflo, Esther, 2003. "Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-299, September.
    21. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    22. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    23. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, April.
    24. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    25. repec:bla:ausecp:v:40:y:2001:i:2:p:111-32 is not listed on IDEAS
    26. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lin Yi-Chen & Huang Ho-Chuan (River) & Yeh Chih-Chuan, 2014. "Inequality-growth nexus along the development process," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(3), pages 237-252, May.
    2. Andergassen, Rainer & Nardini, Franco, 2007. "Educational choice, endogenous inequality and economic development," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 940-958, December.
    3. Basu, Parantap & Getachew, Yoseph, 2015. "An adjustment cost model of social mobility," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 177-190.
    4. Basu, Parantap & Guariglia, Alessandra, 2007. "Foreign Direct Investment, inequality, and growth," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 824-839, December.
    5. Lin Shu-Chin & Huang Ho-Chuan & Kim Dong-Hyeon & Yeh Chih-Chuan, 2009. "Nonlinearity between Inequality and Growth," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(2), pages 1-20, May.
    6. Arshad Ali Bhatti & M. Emranul Haque & Denise R. Osborn, 2015. "Threshold Effects of Inequality on the Process of Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 205, Economics, The University of Manchester.
    7. Parantap Basu & Alessandra Guariglia, 2004. "Inequality and Industrialization," CDMA Conference Paper Series 0401, Centre for Dynamic Macroeconomic Analysis.
    8. Wang, Shengquan, 2023. "Income inequality and systemic banking crises: A nonlinear nexus," Economic Systems, Elsevier, vol. 47(4).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amparo Castelló-Climent, 2004. "A Reassessment Of The Relationship Between Inequality And Growth: What Human Capital Inequality Data Say?," Working Papers. Serie EC 2004-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Reto Foellmi & Josef Zweimuller, 2006. "Income Distribution and Demand-Induced Innovations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 941-960.
    3. Thomas Leoni & Wolfgang Pollan, 2003. "The Impact of Inequality on Economic Growth," WIFO Working Papers 211, WIFO.
    4. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    5. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(2), pages 349-375, April.
    6. Adalgiso Amendola & Roberto Dell�Anno, 2014. "Income inequality and economic growth: an empirical investigation in Mediterranean countries," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 68(2), pages 35-58, April-Jun.
    7. Ademola Obafemi Young, 2019. "Growth Impacts of Income Inequality: Empirical Evidence From Nigeria," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 226-262, December.
    8. Marrero, Gustavo A. & Rodríguez, Juan G., 2013. "Inequality of opportunity and growth," Journal of Development Economics, Elsevier, vol. 104(C), pages 107-122.
    9. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    10. Lin Shu-Chin & Huang Ho-Chuan & Kim Dong-Hyeon & Yeh Chih-Chuan, 2009. "Nonlinearity between Inequality and Growth," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(2), pages 1-20, May.
    11. Kholeka Mdingi & Sin-Yu Ho, 2023. "Income inequality and economic growth: An empirical investigation in South Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2230027-223, June.
    12. Oded Galor, 2009. "Inequality and Economic Development: An Overview," Working Papers 2009-3, Brown University, Department of Economics.
    13. Amparo Castelló-Climent, 2010. "Inequality and growth in advanced economies: an empirical investigation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(3), pages 293-321, September.
    14. Bandyopadhyay, Debasis & Basu, Parantap, 1999. "The Growth-Inequality Relationship in A Model with Discrete Occupational Choice and Redistributive Tax," Working Papers 213, Department of Economics, The University of Auckland.
    15. Seher Gülşah Topuz, 2022. "The Relationship Between Income Inequality and Economic Growth: Are Transmission Channels Effective?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(3), pages 1177-1231, August.
    16. Grossmann, Volker, 2008. "Risky human capital investment, income distribution, and macroeconomic dynamics," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 19-42, March.
    17. Cristiano Perugini & Gaetano Martino, 2008. "Income Inequality Within European Regions: Determinants And Effects On Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 373-406, September.
    18. Asli Demirgüç-Kunt & Ross Levine, 2009. "Finance and Inequality: Theory and Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 287-318, November.
    19. Isaac Ehrlich & Jinyoung Kim, 2007. "The Evolution of Income and Fertility Inequalities over the Course of Economic Development: A Human Capital Perspective," Journal of Human Capital, University of Chicago Press, vol. 1(1), pages 137-174.
    20. Oded, Galor, 2011. "Inequality, Human Capital Formation, and the Process of Development," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 441-493, Elsevier.

    More about this item

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:canjec:v:38:y:2005:i:4:p:1272-1297. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.