Proceedings of the 18th International Academic Conference, London

REDISTRIBUTION AND INEQUALITY IMPACT ON ECONOMIC GROWTH TO THE EXTENT OF ECONOMIC FREEDOM

GÖKSU ASLAN

Abstract:

In this paper, redistribution and inequality impact on economic growth are observed for the countries in the panel framework approach, to the extent of their economic freedom score. There exists a growing research interest on inequality and economic growth relationships in the global level. On the other hand, redistributive policies and their effects are highly controversial since some views cover that the interventions for equality may have negative effects on economic growth. I apply system GMM estimation on a dynamic panel model as to test inequality and redistribution effects on economic growth and compare with ordinary least squares, within group and difference GMM estimations. Dataset includes annual observations from 1995 to 2011 for 141 countries. According to the SYS-GMM estimation results, for economically free countries, both net inequality and redistribution have negative impact on economic growth . The impact of net inequality is absolutely higher than impact of redistribution. For economically unfree countries, net inequality has positive significant effect, while redistribution has negative significant effect which is very low.

Keywords: Economic growth, GDP, GMM, inequality, redistribution, economic freedom

DOI: 10.20472/IAC.2015.018.016

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