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Inequality and Growth: The Neglected Time Dimension


Halter, Daniel; Oechslin, Manuel; Zweimüller, Josef (2010). Inequality and Growth: The Neglected Time Dimension. Working paper series / Institute for Empirical Research in Economics No. 507, University of Zurich.

Abstract

The empirical literature on the relationship between inequality and growth offers a contradictory assessment: Estimators based on time-series (differences-based) variation indicate a strong positive link while estimators (also) exploiting the cross-sectional (levelbased) variation suggest a negative relationship. Using an expanded dataset, the presentnpaper confirms this conflicting pattern — and reconciles it on the basis of a simple model.nWe argue that the differences-based methods are prone to reflect the mostly positive shortor medium-run implications of inequality while the level-based estimators also incorporate more negative long-term consequences. Thus, the latter estimates come close to reflecting the adverse overall impact of inequality in the long run.

Abstract

The empirical literature on the relationship between inequality and growth offers a contradictory assessment: Estimators based on time-series (differences-based) variation indicate a strong positive link while estimators (also) exploiting the cross-sectional (levelbased) variation suggest a negative relationship. Using an expanded dataset, the presentnpaper confirms this conflicting pattern — and reconciles it on the basis of a simple model.nWe argue that the differences-based methods are prone to reflect the mostly positive shortor medium-run implications of inequality while the level-based estimators also incorporate more negative long-term consequences. Thus, the latter estimates come close to reflecting the adverse overall impact of inequality in the long run.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:September 2010
Deposited On:29 Nov 2011 15:09
Last Modified:12 Aug 2017 12:41
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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