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Institutet fr Framtidsstudier - Institute for Futures Studies Arbetsrapport, Institutet fr Framtidsstudier - Institute for Futures Studies

No 2005:3:
Income Inequality and Growth: a Panel Study of Swedish Counties 1960-2000

Ruth-Ada Nahum

Abstract: This paper explores the relationship between income inequality and growth using panel data on Swedish counties from 1960-2000. Compared to standard methods of estimating this relationship yearly regional level data are used, and inequality is allowed to be endogenous. We find a significant positive impact of inequality on growth, but the magnitude of the effect decreases with the length of the growth period studied. When allowing income inequality to be endogenous, using a panel 2SLS IV estimation, we find positive effect of inequality on 1 to 5-year growth rates, when significant, whereas the effect on 10-year growth rates are not clear cut.

Keywords: Income inequality; regional economic growth; panel data; (follow links to similar papers)

JEL-Codes: D31; O15; O40; (follow links to similar papers)

43 pages, March 2005

ISSN 1652-120X ISBN 91-89655-61-3

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