On the Dynamic Relationship between Inequality and Economic Growth

Jeyoung Moon; Dong Heon Kim

doi:10.22904/sje.2022.35.3.002

On the Dynamic Relationship between Inequality and Economic Growth

Jeyoung Moon
, Dong Heon Kim^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

This study reexamines the nonlinear relationship between inequality economic growth in the dynamic context and addresses the nonlinear function and the nature of its nonlinearity. Nonlinear flexible inference was used for the unknown functional relation with estimation results based on the panel data set of 77 countries for the period 1982–2019, confirming earlier findings for the nonlinear relationship between inequality and growth. Particularly, there exists a threshold value in the Gini Coefficient and level of inequality when it is greater than the threshold value, the decrease in inequality seems to enhance economic growth and if the level is less than the threshold value, the reduction in inequality appears to impede economic growth. The inclusion of the threshold specification appears to characterize the nonlinear relationship adequately, thus capturing the nature of nonlinearity.

Original language	English
Pages (from-to)	241-260
Number of pages	20
Journal	Seoul Journal of Economics
Volume	35
Issue number	3
DOIs	https://doi.org/10.22904/sje.2022.35.3.002
Publication status	Published - 2022

Bibliographical note

Funding Information:
Jeyoung Moon, Ph.D. student, Department of Economics, Ohio State University, U.S. (E-mail): [email protected]; Dong Heon Kim, Corresponding Author, Professor, Department of Economics, Korea University, South Korea (E-mail): [email protected] The part of this paper has been based on the Jeyoung Moon’s MA dissertation at the Korea University. The authors thank James D. Hamilton and seminar participants on the 2020 Japanese Society of International Economics Conference and the 2021 Korea and World Economy Conference. Dong Heon Kim thanks the Korea University Research Grant.

Publisher Copyright:
© 2022, Seoul Journal of Economics. All Rights Reserved.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 10 Reduced Inequalities

Keywords

Economic growth
Flexible inference
Income inequality
Nonlinearity
Threshold value

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

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10.22904/sje.2022.35.3.002

Cite this

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title = "On the Dynamic Relationship between Inequality and Economic Growth",

abstract = "This study reexamines the nonlinear relationship between inequality economic growth in the dynamic context and addresses the nonlinear function and the nature of its nonlinearity. Nonlinear flexible inference was used for the unknown functional relation with estimation results based on the panel data set of 77 countries for the period 1982–2019, confirming earlier findings for the nonlinear relationship between inequality and growth. Particularly, there exists a threshold value in the Gini Coefficient and level of inequality when it is greater than the threshold value, the decrease in inequality seems to enhance economic growth and if the level is less than the threshold value, the reduction in inequality appears to impede economic growth. The inclusion of the threshold specification appears to characterize the nonlinear relationship adequately, thus capturing the nature of nonlinearity.",

keywords = "Economic growth, Flexible inference, Income inequality, Nonlinearity, Threshold value",

author = "Jeyoung Moon and Kim, \{Dong Heon\}",

note = "Funding Information: Jeyoung Moon, Ph.D. student, Department of Economics, Ohio State University, U.S. (E-mail): [email protected]; Dong Heon Kim, Corresponding Author, Professor, Department of Economics, Korea University, South Korea (E-mail): [email protected] The part of this paper has been based on the Jeyoung Moon{\textquoteright}s MA dissertation at the Korea University. The authors thank James D. Hamilton and seminar participants on the 2020 Japanese Society of International Economics Conference and the 2021 Korea and World Economy Conference. Dong Heon Kim thanks the Korea University Research Grant. Publisher Copyright: {\textcopyright} 2022, Seoul Journal of Economics. All Rights Reserved.",

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doi = "10.22904/sje.2022.35.3.002",

language = "English",

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N2 - This study reexamines the nonlinear relationship between inequality economic growth in the dynamic context and addresses the nonlinear function and the nature of its nonlinearity. Nonlinear flexible inference was used for the unknown functional relation with estimation results based on the panel data set of 77 countries for the period 1982–2019, confirming earlier findings for the nonlinear relationship between inequality and growth. Particularly, there exists a threshold value in the Gini Coefficient and level of inequality when it is greater than the threshold value, the decrease in inequality seems to enhance economic growth and if the level is less than the threshold value, the reduction in inequality appears to impede economic growth. The inclusion of the threshold specification appears to characterize the nonlinear relationship adequately, thus capturing the nature of nonlinearity.

AB - This study reexamines the nonlinear relationship between inequality economic growth in the dynamic context and addresses the nonlinear function and the nature of its nonlinearity. Nonlinear flexible inference was used for the unknown functional relation with estimation results based on the panel data set of 77 countries for the period 1982–2019, confirming earlier findings for the nonlinear relationship between inequality and growth. Particularly, there exists a threshold value in the Gini Coefficient and level of inequality when it is greater than the threshold value, the decrease in inequality seems to enhance economic growth and if the level is less than the threshold value, the reduction in inequality appears to impede economic growth. The inclusion of the threshold specification appears to characterize the nonlinear relationship adequately, thus capturing the nature of nonlinearity.

KW - Economic growth

KW - Flexible inference

KW - Income inequality

KW - Nonlinearity

KW - Threshold value

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SN - 1225-0279

VL - 35

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JO - Seoul Journal of Economics

JF - Seoul Journal of Economics

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ER -

On the Dynamic Relationship between Inequality and Economic Growth

Abstract

Bibliographical note

UN SDGs

Keywords

ASJC Scopus subject areas

Access to Document

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