Original scientific paper
https://doi.org/10.1080/1331677X.2022.2080742
How does income inequality affects economic growth at different income levels?
Chengfang Shen
Xindong Zhao
Abstract
To address the slowdown in growth from an inequality perspective,
this study applies a comprehensive dataset with strong comparability
and a dynamic panel threshold model to explore the
effect of income inequality on economic growth, its channels of
influence, and differences in channels due to country differences,
considering income level differences and country differences. The
study finds that whilst inequality impedes growth in the general
growth framework, this impediment becomes insignificant when
the fertility rate or country differences are controlled for. Second,
the impeding effect of inequality on growth occurs at low-income
levels rather than at high-income levels. Finally, in the low-income
stage, inequality tends to impede growth through channels that
reduce the level of human capital and political stability and
increase fertility, rather than through channels that affect investment,
and the channels vary slightly by the country’s economic
systems, religious beliefs, and saving habits. This study suggests
that at the low-income stage, the government should appropriately
increase the proportion of labour compensation, improve
the redistribution system, encourage the development of charity,
and establish a sound social donation system.
Keywords
Income inequality; economic growth; income levels; country differences; influence channel
Hrčak ID:
303758
URI
Publication date:
31.3.2023.
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