Investment, Inequality and Openness: A Cross-Country Analysis
This paper explores the relationship between inequality and investment based on a panel for 95 countries. It considers a wide range of determinants and econometric methodologies. This work improves the existing literature since (i) it connects inequality with investment; (ii) it controls by a wide s...
Guardado en:
| Autores principales: | , |
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| Formato: | Objeto de conferencia |
| Lenguaje: | Inglés |
| Publicado: |
2018
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| Materias: | |
| Acceso en línea: | http://sedici.unlp.edu.ar/handle/10915/164852 |
| Aporte de: |
| Sumario: | This paper explores the relationship between inequality and investment based on a panel for 95 countries. It considers a wide range of determinants and econometric methodologies. This work improves the existing literature since (i) it connects inequality with investment; (ii) it controls by a wide set of variables contrasting different theoretical approaches; (iii) the sample includes advanced and developing countries; and (iv) tests for a possible non-linear relationship.
The paper documents a concave and non-monotonic ("U-shape") relationship between inequality and investment. At low levels of initial inequality, greater inequality is associated with lower investment; but at high levels of initial inequality the relationship is positive. The differentiation between advanced and emerging countries shows some specific features for the control variables. Given the high correlation between the wage share and inequality, policies of wage restriction cause inequality to increase, thus generating lower investment and growth when countries present low or middle levels of inequality. With high levels of inequality the result is the opposite, so it is possible that if these countries are open economies (i.e. “export-led”) they could fall into a high-growth with high-inequality trap where only government policy could push the country to the other side of the “U.” |
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