How Does Income Distribution Affect Economic Growth? -Evidence from Japanese Prefectural Data-
17 Pages Posted: 2 Aug 2014
Date Written: August 1, 2014
Abstract
This paper uses Japanese prefectural panel data to analyze how income distribution affects economic growth. In the fixed effects and the GMM estimations, the income share of the third quintile has positive and statistically significant effects on five-year economic growth rates. On the other hand, the Gini indices have positive and statistically significant effects on both of the five-year and ten-year economic growth rates in the fixed effects estimations, and negative effect on the five-year growth rate in the GMM once. These results can be explained with the modified median voter theory.
Keywords: income distribution, economic growth, panel data, Japan
JEL Classification: O40, C33, J01
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