Inequality and Growth in a Panel of Countries

“Barro (2000) discovered a positive and significant effect of the trade openness ratio on income inequality based on betweencountry data. Galiani and Sanguinetti (2003) found a significant positive relationship between import penetration and the skilled-wage premium in Argentina during the 1990s. Gonzaga, Menezes, and…”

“…inequality at the country level (i.e., Fields 1979, for Least Developed Countries; Milanovic 1994, Li et al. 1998, Gustafsson and Johansson 1999, Barro 2000, Vanhoudt 2000, Frazer 2006, and Roine et al. 2009, for world samples; Odedokun and Round 2004, for Africa; and Castells-Quintana and…”

“Barro (2000) concluded that the effect of income inequality on growth might be positive or negative depending on the level of economic development.”

“Barro (2000) and CastellóCliment (2010), for instance, investigate the effects of inequality on growth separately for rich and poor countries and find the relationship to be positive in the former and negative in the latter (compare also Bandyopadhyay and Basu (2005) for a theoretical model on this…”

“This literature includes a strand that seeks to identify the determinants of inequality (Deininger and Squire, 1998; Vanhoudt, 2000; Barro, 2000; Odedokun and Round, 2001).”

“For poor countries, high inequality becomes harmful in the long run (Partridge 1997; Barro 2000).”

“However, in the results reported by Barro (2000), the effect of income inequality on economic growth may differ in developed and developing economies, somewhat in line with the Kuznets curve; whereby inequality first increases and later decreases during the process of economic development. On the contrary, Kraay (2002…”

“Historically, high levels of land inequality were often associated with low levels of subsequent growth (Barro 2000, Deininger and Squire 1998, Vollrath 2007).”

“1See [5, 12, 14] for overviews of the theoretical literature, and [7, 8, 17, 26, 48] for empirical evidence.”

“Unlike the predictions of [10,11], the results support the findings of [23,43].”

“In this section, we introduce Gini coefficient (Barro 2000) to measure such inequality.”

“Moreover, inequality is well established to undermine income (39); inequality thus indirectly reduces life expectancy by reducing income.”

“Barro (2000) finds that in developing countries openness to trade, non-protectionist policies, and smaller government are associated with greater income inequality. In contrast, Dollar and Kraay (2002) find evidence that free trade and open economic policies lead to increased equality in a sample of eighty countries t…”

“Perotti (1996) and Persson and Tabellini (1992, 1994), but in contrast to what obtained for other developed economies by Barro (1999) .”

“The series for HQ came from the data set constructed by Barro and Lee (2001). The Appendix reports all our relevant data.”

“9 For reasons of comparison I present this equation in column 1 of Table 4. Next I re-estimate this equation by assuming random in stead of fixed effects (equation 2). I also present estimation results for a model in which a common constant is assumed (equation 3). The reason is that some authors (notably Barro 2000 )…”

“…development, income inequality will start to fall, forming an inverted U-curved shape of income-inequality relationship (Bagchi & Svejnar, 2015; Banerjee & Duflo, 2003; Barro, 2000; Batabyal & Chowdhury, 2015; Elmawazini et al., 2013; Kotarski, 2015; Rose & Viju, 2014; Shahbaz, 2010; Shin, 2012).”

“Barro (2000) examined 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 sociopolitical status of each country.”

“Consequently, the gap between wages has widened, thus pushing upwards within-country inequality trends, particularly in low-income countries (see Barro (2000), Kapstein and Milanovic (2002), Lundberg and Squire (2003) and also Kremer and Maskin (1996, 2006) for an alternative theoretical interpretation).”

“x(θ, j, t) =  1, p(j, t) ≤ z(θ, t) 0, p(j, t) > z(θ, t) where z(θ, t) ≡ eR(τ ,t)−ρ(t−τ) μ(θ)N(θ, t) , (1)”

“The relationship between income inequality and growth has spawned a large theoretical and empirical body of literature (for a survey, see, e.g., Barro, 2000; Forbes, 2000; Kanbur, 2000).”

“Following the previous literature (e.g., Barro, 2000), income and private investment are treated as endogenous variables.”

“Barro (2000) finds some evidence in support of the Kuznets hypothesis in a sample of countries including both developed and developing economies. Sukiassyan (2007) finds a strong negative effect of inequality on growth in a sample of TE, but, as reported in the text, no evidence in support of non-linearities. 10. The…”

“The coefficients on LGDP and LGDP 2 are statistically insignificant in 6 out of the 10 specifica- tions. This contrasts with Barro (2000) .”

“22 See Kuznets (1955), Barro (2000), and more recently Hacibedel et al.”

“In addition, the UN’s Millennium Development Goals (2000) whose objective is to eradicate extreme poverty, improve living conditions and facilitates progress towards sustainable development; however the Millennium Development Goals do not include any mention of access to energy.”

“By contrast, Li and Zou (1998), Barro (2000), and Forbes (2000) document a positive relationship, reflecting either the relative savings propensities of rich versus poor or the presence of investment indivisibilities.”

“…may be an important determinant of growth (Aghion, Caroli, and Garcia-Peñalosa, 1999; Alesina and Perotti, 1996; Banerjee and Duflo, 2003; and Barro, 2000), and in part because such studies are now possible: the majority of countries have collected the household survey data necessary to…”

“Please see Barro (2000) for a concise summary of related theoretical literatures.”

“The theoretical and empirical literature on income inequality and economic development has shown three ways in which inequality can have a negative effect on investment or growth.(17) First, in economies with credit imperfections, where domestic investment depends predominantly on individual wealth, a distortion-free…”

“According to Barro (2000) and Lazear and Rosen (1981), higher-income inequality provides incentives to economic activities.”

“These better estimation techniques have mainly involved panel data methodologies (Barro, 2000; Forbes, 2000; Panizza, 2002; Partridge, 2005; Frank, 2009; Cingano, 2014; Naguib, 2015) .”

“Barro (2000) found its negative growth effect for low-income countries while positive effect for high-income countries.”

“A select number of studies have proposed that this ambiguity could be due to the fact that income inequality has distinct offsetting effects on subsequent growth that may cancel out in the aggregate (Barro, 2000; Voitchovsky, 2005).”

“, Romer 1986; Lucas 1988; Krugman 1991; Barro and Sala-i-Martin 1995; Fujita, Krugman, and Venables 1999). Because theories have an unclear message about the evolution of regional disparities, empirical studies can serve as a test among alternative theories. However, the existing empirical studies on the EU provide mi…”

“Both sources have been widely used and have allowed the introduction of distributional variables into a broad range of studies, e.g. Barro, 2000; Dollar and Kraay, 2002; Dollar et al., 2013.”

“In the economic literature, recent empirical evidence indicates that where inequality in developing countries is great, economic growth is retarded (Barro, 2000).”

“Other studies have differentiated between the impact of trade openness on developing and developed countries, showing that greater openness entails an increase in inequality at least in the poorer countries (Barro 2000; Ravallion 2001; Easterly 2007; Bensidoun, Jean and Sztulman, 2011).”

“This literature is reviewed in Barro (2000), Helpman (2004) and Garcia-Penalosa and Turnovsky (2006). Lucas (1988) emphasizes the role of external effects on human capital accumulation and productivity. Following this, there is a large number of articles that also assume spillover effects on human capital formation. F…”

“factor prices are derived (in equations 7 and 11), equation (5) is sufficient for”

“- Barro, R. J. (2000), “Inequality and Growth in a Panel of Countries”, Journal of Economic Growth, 5, pp.”

“…using para-3 metric quadratic models have been improved by nonparametric4 studies using cross-section data with nonparametric functional5 forms or higher-than-second-order nonlinearity (Li et al., 1998;6 Barro, 2000; Bulír̆, 2001; Iradian, 2005; Mushinski, 2001; Huang,7 2004; Lin et al., 2006).”

“4 Recent studies, such as Barro and Lee (1993), have focussed on years of schooling as a measure of education.”

“…in these economies should be circumspect since it cannot be overlooked that higher income inequality can impede economic growth by encouraging disruptive socio-political activities such as riots, crime, political turnovers, etc. (Alesina and Perotti 1996; Barro 2000; Ezcurra 2007; Perotti 1996).”

“19 See Forbes (2000), Barro (2000) and, more recently, Halter et al. (2014), Dabla‐Norris et al.”

“Arguments in favour of free trade suggest that trade liberalisation accelerates economic growth which leads to reductions in poverty and income inequality in developing countries (e.g. Winters 2000, 2004; Bourguignon and Morrison 1990; Barro 2000; Dollar and Kraay 2002).”

“According to Barro (2000) , these theories can be classified into”

“Empirical work by Barro (2000), Quah (2001), and Panizza (2002), however, has found little or no stable relationship between inequality and growth; results appear to be extremely sensitive to the econometric specification.”

“For a critical assessment of the cross-section analyses and an overview of possible channels of interaction between inequality nd growth see Aghion et al. (1999) as well as Barro (2000).”

“Barro (2000) concluded that inequality was detrimental to growth in developing nations but promoted growth in developed nations.”

“Many scholars have investigated the effect of economic growth on the income gap (Barro 2000; Kuznets 1955).”

“In this context, considering the significant linkage between the income and the human capital levels, our finding confirms the major finding of the literature that while inequality has a negative effect on growth in low and middle income countries, the effect becomes positive or insignificant for higher income countri…”

“2006), as well as slow economic growth (Barro 2000) or low provision rates of social goods (Pickett and Wilkinson 2009).”

“Barro (2000), Thornton (2001) and Huang (2004) find support for the hypothesis, while Deininger and Squire (1998), Frazer (2005), Huang, Lin and Yeh (2012) refute it.”

“He highlights a number of studies that have combined survey-based measures of income inequality at country level with data on trade and other control variables to assess the distributional impacts of trade openness; the latter is typically measured by “trade volume,” defined by exports plus imports as a share of GDP (…”

“Civil unrest may also be affected by how well (or how badly) social and political institutions operate (see Alesina et al. 1996; Barro 2000; Acemoglu and Robinson 2007).”

“Barro (2000) applies a three stage least squares, over the period 1960-1990, and finds that income inequality has no significant relation with subsequent economic growth.”

“economy.(3) (2)The survey in Browning, Hansen, and Heckman (1999) suggests a wide range of estimates from micro evidence for ηξ, between 0.”

“The closer its value to 0 indicates that the income distribution tends to be more equal [64].”