Links Between Inequality and Growth in Developed Countries: the Role of Corruption
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Abstract
This article investigates the global effect of inequality upon growth, i.e., both its direct influence as the influence of the channels that connect these variables. The study is performed upon a wide variety of countries during the 1985-2018 period. With the goal of identifying the channels between inequality and growth, the estimations were made through the SURE (Seemingly Unrelated Regression Equations) method. The results found by the study indicate that, in general, inequality is prejudicial for growth in the form of corruption as directly, being corruption the main channel responsible for concentrating income and being detrimental for the economy. Thus, the policy recommendation resulting from this study suggests the application of a tax system and a progressive tax policy with strong controls to reduce the global inequality alongside the development of control mechanisms that limit the power of influence in the assignment of resources.
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References
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