Income Inequality and Economic Growth: Evidence from American Data

Posted: 25 Feb 2002

See all articles by Ugo Panizza

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; CEPR

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Abstract

While most cross-country studies find a negative relationship between income inequality and economic growth, studies that use panel data suggest the presence of a positive relationship between inequality and growth. This paper uses a cross-state panel for the U.S. to assess the relationship between inequality and growth. Using both standard fixed effects and GMM estimations, this paper does not find evidence of a positive relationship between inequality and growth but finds some evidence in support of a negative relationship between inequality and growth. The paper, however, shows that the relationship between inequality and growth is not robust and that small differences in the method used to measure inequality can result in large differences in the estimated relationship between inequality and growth.

Keywords: Inequality, Endogenous Growth, Political Economy

JEL Classification: D31, E62, P16, O41, I22

Suggested Citation

Panizza, Ugo, Income Inequality and Economic Growth: Evidence from American Data. Available at SSRN: https://ssrn.com/abstract=298619

Ugo Panizza (Contact Author)

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

CEPR ( email )

London
United Kingdom

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