Causes and Consequences of Income Inequality

Abstract

2 This analysis is based on a sample of 159 advanced, emerging, and developing economies for the period 1980-2012 using a simple growth model (with time and country fixed effects) in which growth depends on initial income (convergence hypothesis), lagged GDP growth, and inequality (as measured by net Gini or the income shares accruing to various quintiles) estimated using system GMM. Augmenting this model with standard growth determinants, such as human and physical capital, does not affect our main findings. See Annex for data sources.