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Income inequality and growth: A regime-switching approach

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  • Nektarios Aslanidis

    (Department of Economics, University of Crete, Greece)

Abstract

This paper explores the methodology of regime-switching in the analysis of the income inequality-economic growth relationship. The underlying idea is that when some income determinant passes a certain threshold introduces a new relationship between inequality and income and/or income determinants. There are three implications of the estimated models. First, inequality decreases with economic growth when government consumption as share of GDP is ‘low’. Second, in a ‘low’ inflation environment government consumption increases inequality. Third, in countries with ‘strict’ rule of law openness to international trade and government consumption are associated with lower inequality, while financial development implies higher inequality.

Suggested Citation

  • Nektarios Aslanidis, 2004. "Income inequality and growth: A regime-switching approach," Working Papers 0406, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0406
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Kuznets curve; regime-switching; growth determinants; thresholds;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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