G4 Doctoral dissertation (monograph)
Essays on the relationship between income inequality and economic growth (2021)
Taloustieteellisiä tutkimuksia tuloerojen ja talouskasvun välisestä yhteydestä


Juuti, T. (2021). Essays on the relationship between income inequality and economic growth [Doctoral dissertation]. Jyväskylän yliopisto. JYU Dissertations, 403. http://urn.fi/URN:ISBN:978-951-39-8742-8


JYU authors or editors


Publication details

All authors or editors: Juuti, Toni

eISBN: 978-951-39-8742-8

Journal or series: JYU Dissertations

eISSN: 2489-9003

Publication year: 2021

Number in series: 403

Number of pages in the book: 233

Publisher: Jyväskylän yliopisto

Place of Publication: Jyväskylä

Publication country: Finland

Publication language: English

Persistent website address: http://urn.fi/URN:ISBN:978-951-39-8742-8

Publication open access: Openly available

Publication channel open access: Open Access channel


Abstract

This doctoral dissertation studies the relationship between income inequality and economic growth. It adds to the literature by incorporating the division of income between capital and labor into the analysis, by evaluating the role of financial conditions, by acknowledging country-specificity, by closely examining popular estimation techniques, and by adopting multiple measures of inequality. The dissertation comprises an introductory chapter and five studies. The first four are empirical, while the fifth contains both empirical and theoretical analyses. The first essay documents how results on the association between income inequality and subsequent per capita GDP growth depend on estimation technique. Specifically, accounting for country-specific unobservable characteristics explains many of the negative associations obtained using techniques that ignore them. It is also found that GMM techniques are not effective in disentangling causation from correlation. The second essay tests the prevalence of financial development as a determinant of the inequality-growth relationship. A multi-dimensional measure of financial development is adopted, and the results imply that promoting the development of financial markets may alleviate the adverse effects of income inequality on economic growth in under-developed countries. Unlike the first two essays, which rely on cross-country panel data, the third focuses on individual countries. Clear differences between countries are documented, and evidence is found for the proposition that economic growth responds asymmetrically to fluctuations in inequality. The fourth essay introduces data on capital shares and shows that shares are integrated between countries. In all sample countries, changes in capital shares are mainly driven by a single latent factor. In most of the countries, the factor is correlated with both trade openness and total factor productivity. The fifth essay shows that, as a matter of both empirics and theory, the association between top income shares and growth is positive when the capital share of income is low and negative when the capital share of income is high. The empirical regularity emerges from historical data. The theoretical analysis stresses the importance of precautionary saving motives and consumption smoothing.


Keywords: income differences; income distribution; economic growth; earned income; income from work; capital income; financial markets; economic development; international comparison; doctoral dissertations

Free keywords: income inequality; top income shares; economic growth; panel data; GMM estimators; financial development; cross-country integration; functional income distribution; capital share


Contributing organizations


Ministry reporting: Yes


Last updated on 2022-15-06 at 17:05