Robust Correlates of Growth Spells: Do Inequality and Redistribution Matter?

Abstract

Theoretical and empirical evidence on inequality and growth provides only partial guidance about the relationship. Much of the problem stems from model uncertaintyabout what covariates to use, the relationships between them, and the transmission mechanisms-which is often not properly accounted for. This paper investigates the relationship between growth, redistribution, and the duration of growth spells in the presence of a rich set of alternative determinants and theories using model averaging for duration models to account for model uncertainty. We find that lower net inequality is robustly correlated with longer growth spells, while redistribution appears generally benign for growth spells, but the effect is not robust. In addition, there is no evidence of nonlinearities in the inequality-redistribution-growth spell relationship. Finally, lower initial income, higher secondary education and higher FDI are associated with longer spell duration.

Inequality and the impact of growth on poverty in sub‐Saharan Africa: A GMM estimator in a dynamic panel threshold model

“…They found that a shock to inequality has a negative impact on growth. Kourtellos and Tsangarides (2022) found that lower net inequality is associated with longer growth periods. Redistribution does not appear to be correlated with the length of growth periods.…”