TY - JOUR
T1 - Inequality, financial development and economic growth in the OECD, 1870–2011
AU - Madsen, Jakob B.
AU - Islam, Md. Rabiul
AU - Doucouliagos, Hristos
PY - 2018/1/1
Y1 - 2018/1/1
N2 - Inequality's effect on growth remains elusive, largely due to endogeneity, complex interactions, and lead–lag relationships. We revisit this issue by examining the four main channels through which inequality transmits to growth: savings, investment, education, and knowledge production. We construct new panel data for 21 OECD countries spanning 142 years. External communist influence is used as a new time-varying instrument for inequality and the effects of inequality on the outcome variables are made conditional on the stage of financial development. Our results show that inequality hampers growth at low to moderate levels of financial development but has little effect on growth at advanced levels of financial development.
AB - Inequality's effect on growth remains elusive, largely due to endogeneity, complex interactions, and lead–lag relationships. We revisit this issue by examining the four main channels through which inequality transmits to growth: savings, investment, education, and knowledge production. We construct new panel data for 21 OECD countries spanning 142 years. External communist influence is used as a new time-varying instrument for inequality and the effects of inequality on the outcome variables are made conditional on the stage of financial development. Our results show that inequality hampers growth at low to moderate levels of financial development but has little effect on growth at advanced levels of financial development.
KW - Financial development
KW - Inequality
KW - Transmission channels
UR - https://www.scopus.com/pages/publications/85037615040
U2 - 10.1016/j.euroecorev.2017.11.004
DO - 10.1016/j.euroecorev.2017.11.004
M3 - Article
AN - SCOPUS:85037615040
SN - 0014-2921
VL - 101
SP - 605
EP - 624
JO - European Economic Review
JF - European Economic Review
ER -
