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An Empirical Analysis Of The Relationship Between Income Inequality And Growth Volatility In 70 Countries For 1960-2002

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  • KONYA, Laszlo
  • MOURATIDIS, Chris

Abstract

The aim of this paper is to study the potentially simultaneous relationship between income inequality and growth volatility for seventy countries between 1960 and 2002. Two types of analysis are performed; a cross-sectional analysis based on country averages of all available annual observations, and a panel-data analysis with fixed effects based on 6-year averages. The cross-sectional and panel estimation results are markedly different. In the first case, there seems to be a mutual relationship between inequality and volatility across countries, but several significant coefficients have illogical signs. In the second case, there is no evidence of simultaneity within a country; inequality is influenced by volatility, but inequality does not have a direct effect on volatility. Given the limitations of the cross-sectional analysis, we believe that the simultaneous relationship found in the cross-sectional model is rather spurious than real.

Suggested Citation

  • KONYA, Laszlo & MOURATIDIS, Chris, 2006. "An Empirical Analysis Of The Relationship Between Income Inequality And Growth Volatility In 70 Countries For 1960-2002," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(1).
    • Handle: RePEc:eaa:aeinde:v:6:y:2006:i:1_1
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    Cited by:

    1. Huang, Ho-Chuan (River) & Fang, WenShwo & Miller, Stephen M. & Yeh, Chih-Chuan, 2015. "The effect of growth volatility on income inequality," Economic Modelling, Elsevier, vol. 45(C), pages 212-222.
    2. Goodness C. Aye & Giray Gozgor & Rangan Gupta, 2020. "Dynamic and Asymmetric Response of Inequality to Income Volatility: The Case of the United Kingdom," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(3), pages 747-762, February.
    3. Chang, Shinhye & Gupta, Rangan & Miller, Stephen M. & Wohar, Mark E., 2019. "Growth volatility and inequality in the U.S.: A wavelet analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 48-73.

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    More about this item

    Keywords

    income inequality; GDP growth volatility; panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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