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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Inequality and Growth: The Neglected Time Dimension |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 507 |
| ISSN | 1424-0459 |
| Number of Pages | 28 |
| Date | 2011 |
| Abstract Text | The empirical literature on the relationship between inequality and growth offers a contradictory assessment: Estimators based on time-series variation indicate a positive link while estimators (also) exploiting the cross-sectional variation suggest a negative relationship. The present paper (i) confirms this conflicting pattern in an expanded dataset; (ii) proposes a simple theoretical framework to highlight the biases associated with the different techniques. We argue that mechanisms generating a positive inequality-growth relationship work mainly in the short-run and are reflected in difference-based estimators. In contrast, mechanisms generating a negative relationship work over the longer term and are reflected in level-based estimators. |
| Official URL | http://www.iew.unizh.ch/wp/iewwp507.pdf |
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| Keywords | Inequality, growth, short-run effects, long-run effects |
| Additional Information | Revised version |