published in: A. Heshmati ; A. Tausch (eds.), Roadmap to Bangalore? Globalization, the EU Lisbon Process and the Structure of Global Inequality, Hauppauge and New York, 2007, 109-137
This paper examines the causal relationship between inequality and a number of
macroeconomic variables frequently found in the inequality and growth literature. These
include growth, openness, wages, and liberalisation. We review the existing cross-country
empirical evidence on the effects of inequality on growth and the extent to which the poorest
in society benefit from economic growth. The linkage between growth, redistribution and
poverty is also analysed. In the review of literature mainly empirical examples from 1990s are
taken. In addition we test the conditional and unconditional relationship between inequality
and growth in the post World War II period using WIDER inequality database. Regression
results suggest that income inequality is declining over time. Inequality is also declining in
growth of income. There is a significant regional heterogeneity in the levels and development
over time. The Kuznets hypothesis represents a global U-shape relationship between
inequality and growth.
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