Published:
Cambridge, Mass: National Bureau of Economic Research, October 1993
Published in:NBER working paper series ; no. w4486
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w4486
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Description:
This paper successfully tests on a sample of 70 countries for the period 1960-85 the following hypotheses. Income inequality, by fueling social discontent, increases socio-political instability. The latter, by creating uncertainty in the politico-economic environment, reduces investment. As a consequence, income inequality and investment are inversely related. Since investment is a primary engine of growth, this paper identifies a channel for an inverse relationship between income inequality and growth. We measure socio-political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two-equation model in which the endogenous variables are investment and an index of socio-political instability. Our results are robust to sensitivity analysis on the specification of the model and the measure of political instability, and are unchanged when the model is estimated using robust regression techniques