Inequality and Growth in a Panel of Countries

“Barro (2000) using data of 84 countries from Deininger and Squire (1996) data set, found that the empirical results are sensitive to the specific choice of sample of countries.”

“…may matter specifically for poverty are well known: greater access to financial services enables poor people to plan better for the 3 See further Barro (2000), Banerjee and Dufflo (2003) and Forbes (2000) for the relationships between inequality and growth. future and invest in productivity…”

“This finding is consistent with a complex and well-developed history on the relationship between economic growth and income inequality (see, for example, Persson and Tabellini, 1994; Barro, 2000; and Barro, 2008).”

“As regard to measurement errors, they are largely related to the variable measuring income distribution inequality while being less or not at all applicable to other variables (Barro, 2000).”

“…on the effects of inequality on income growth has produced conflicting results in different settings; however, it is widely accepted that inequality can be detrimental to growth (Barro, 2000; Amarante, 2008), especially where market imperfections are widespread (Quintin and Saving, 2008).”

“Economic growth models should also include variables for a nation’s culture, morals and ethics (Barro, 2000).”

“Dependent variable is growth of real GDP per capita 1 2 3 4 Forbes (2000) Forbes (2000) Barro (2000) Barro (2000) Period 1965–1995 1970–1995 1965–1995 1965–1995 Gini index 0.0036 0.0013 0.033 0.054 2.4** 2.16** 1.57 2.16** Sample Almost 50% of sample Almost 50% of sample Low income countries High…”

“…ambiguous: the conventional view is that higher inequality promotes stronger incentives, generates greater savings and investment, and endows the rich with the minimum capital needed to start economic activity, thereby stimulating growth (Aghion et al, 1999; Okun, 2015; Kaldor, 1957; Barro, 2000).”

“If the purely instrumental arguments are considered, the empirical debate and controversy centre on the link between income inequality and economic growth, and more specifically on the potential adverse effects of inequality on growth via a number of channels that include political economy, conflict and capital market…”

“Barro (2000) examines the relationship through three-stage least squares using the same inequality data as in Forbes (2000) with an extensive set of control variables to reflect the socio-political status of each country.”

“Barro (2000) finds a positive (negative) growth-inequality relationship in developed (developing) countries.”

“Barro, R. J. (2000) “Inequality and Growth in a Panel of Countries.”

“…more recent work indicates that this relationship could have weaken or that its capacity to explain variations in income inequality across countries and over time is very limited (Barro, 2000) or that is does not reflect a "natural" evolution but a purely "accidental" evolution (Piketty, 2005).”

“Instead, among others, Forbes (2000), and Barro (2000) do not find a clear negative relationship between inequality and growth.”

“A direct negative link is argued, for example, by Becker and Barro (1988) and Galor and Weil (1996).”

“Barro 2000), the initial level of development (eg.”

“The Gini coefficient is originally used as an economic indicator to measure the income disparity between residents in a region or country [69], and its value is between 0 and 1; when it is close to 0, the distribution tends to be more equal [70].”

“Another strand of literature emphasizes a nonlinear relationship between inequality and growth (Barro, 2000; Banerjee and Duflo, 2003; Benhabib, 2003; Chen, 2003; Lin et al., 2009; Lin and Yeh, 2014; Brueckner and Lederman, 2018).”

“Barro (2000) found a positive relationship between inequality and growth in developed countries and a negative relationship between inequality and growth in developing countries.”

“Those contrasting results in the two steady states are consistent with an empirical finding by Barro (2000) that the relationship between inequality and growth is positive for low-income countries whereas it is negative for high-income countries.”

“) Some research found that openness to trade, non‐protectionist policies, and/or smaller governments were associated with greater income inequality (Savvides, 1998 ; Barro, 2000 ; Lopez, 2004a ).”

“Spilimbergo, Londono, and Szekely (1999), Barro (2000), Dessy, Mbiekop, and Pallage (2010), Joshua, Minsoo, and Donghyun (2014) argued that the Stolper-Samuelson theorem is not supported by the experiences of developing countries. According to criticism of the empirical analysis, the expected convergence trend between…”

“While there has been a great deal of careful research on the role of income inequality in economic growth (Alesina & Rodrik, 1994; Barro, 2000; Forbes, 2000; Frank, 2009; Kuznets, 1955; Partridge, 1997; Partridge, 2005; Persson & Tabellini, 1994), there has been limited investigation as to the role…”

“Some of the notable studies on this topic are Persson and Tabellini (1994), Deininger and Squire (1998), Barro (2000), Forbes (2000), Banerjee and Duflo (2003), and Easterly (2007).”

“…type of redistributive politics described in Section 2), we apply an instrumental variables technique based on two stage FGLS. Typically, scholars have employed lagged values of endogenous variables as instruments when using panel data (see for example, Barro, 2000; RodríguezPose & Ezcurra, 2010).”

“38 Because this finding is inconsistent with other studies (Alesina and Perotti, 1993; Barro, 2000) suggesting that higher inequality would retard growth and investment in low-income countries, how inequality affects growth and investment may highly depend on the context and the particular policies…”

“No caso do índice de Gini, a sua pouca importância na formação de clubes de convergência pode ser explicada pela heterogeneidade no tamanho dos PIBs das unidades da amostra utilizada, o que poderia provocar efeitos em direções opostas, como considerado em Barro (2000).”

“Although the measurement accuracy may be reduced, it provides a valuable extension in the time series (Barro, 2000).”

“High income inequality has been shown to correlate with slower long-run growth (Barro 2000; Berg et al. 2018) and to cause larger macroeconomic volatility and social insecurity (Stiglitz 2012).”

“In contrast, we find that at the top of the distribution, larger remittances are 7 Barro (2000) and Forbes (2000) discuss the channels through which inequality affects growth.”

“Eventually, as catching-up proceeds, the labor-saving tendency attenuates and more egalitarian forces, such as an increase in education (and so in the supply of skilled labor), are allowed to have their impact (for recent revisitings of Kuznets’ law, see Aghion and Howitt, 1997; Barro, 2000; Grimalda and Vivarelli, 20…”

“For example, see Barro (2000), Forbes (2000), and Panizza (2003).”

“Much of the recent work on income and inequality has used panel data to estimate regression coefficients in income and inequality equations [6, 9, 26, 30].”

“But Barro (2000) shows that…[i]n developing but not developed countries, inequality does seem to reduce growth.””

“On the other hand, empirical evidence indicates that, besides the widely-known negative distributional issues, income inequality can also hinder economic performance (see e.g. Forbes, 2000; Barro, 2000).”

“Unexpected GDP growth is measured as the residuals from a model predicting future macroeconomic conditions, using a specification suggested by Barro (2000).”

“Recent studies rely either on cross-country collections of inequality measures (Barro, 2000, 2008) or on the availability of long-term income tax data to analyse the shape of the inequality–income nexus by country over time (Piketty & Saez, 2003).”

“More recent findings suggest that this result must be qualified [Deininger and Squire, 1998; Forbes, 2000; Barro, 2000] Another intensively studied question is whether there has been a change in absolute poverty over time.”

“Therefore, Barro (2000) includes dummies for whether the Gini is derived from data on net income or spending and individual or household units of measure.”

“The exceptions are in high and mid-income nations (e.g., Forbes, 2000; Barro, 2000; Banerjee and Duflo, 2003).”

“These control variables are standard in the inequality and growth literature as in Barro (2000) or Voitchovsky (2005). This equation is derived from a simple equation ∆yt = F (y, y∗), where the growth rate in the economy depends on the level of per capita output y and the long-run level of per capita output y∗.”

“In particular, Barro (2000), Bulı́ř (2001), Thornton (2001) and Chambers (2007) presented evidence that income inequality first rises and then falls as a countrydevelops,whereasDeininger andSquire (1998), Lundberg and Squire (2003) and Kuştepeli (2006) found little evidence that inequality followsan invertedUduring th…”

“Barro ( 2000 ) uses a random effects estimator to consider the effect of inequality on growth.”

“Barro (2000) concluded that the promoting effect of inequality on economic growth tends to occur in developed economies and the hindering effect tends to occur in developing countries.”

“In contrast, many studies find that trade openness aggravates income inequality, particularly in developed countries, and that it is positively associated with the increase in the top income share (Barro 2000; Dorn and Schinke 2018).”