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Size matters: measuring the effects of inequality and growth shocks

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  • Sanghamitra Bandyopadhyay
  • Rui Sun

Abstract

Understanding the relationship between income inequality and economic growth is of utmost importance to economists and social scientists. In this paper we use a Bayesian structural vector autoregression approach to estimate the relationship between inequality and growth via growth and inequality shocks for two large economies, China and the USA, for the years 1979-2018. We find that a growth shock is inequality-increasing, and an inequality shock is growth-reducing.

Suggested Citation

  • Sanghamitra Bandyopadhyay & Rui Sun, 2020. "Size matters: measuring the effects of inequality and growth shocks," WIDER Working Paper Series wp-2020-177, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2020-177
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    References listed on IDEAS

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    Keywords

    Inequality; Growth; Bayesian estimation; Structural VAR; China; United States;
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