What is the effect of income inequality on economic growth?
|Author:||Bc. Dorian Ardeleanu|
|Year:||2019 - summer|
|Leaders:|| PhDr. Jaromír Baxa Ph.D.
|Work type:|| Bachelors
|Awards and prizes:|
|Abstract:||The impact of income inequality on the level of economic growth is an important question, but the existing literature did not reach a consensus about
the sign of its effect. This thesis studies the impact in 93 countries over
the years 1995-2015. We apply two different methods: the fixed effects with
Newey and West standard errors, and the first-difference generalized method
of moments. The main findings emphasize that a widening wealth gap has
an overall negative influence over the real GDP per capita growth. Besides
that, the effect is stronger among low-income countries than among highincome ones. Moreover, we find that the impact of income inequality on
economic growth depends on the governing party’s doctrine. It is negative
and statistically significant only in states with centrist governments.