INEQUALITY AND ECONOMIC GROWTH: A DYNAMIC ANALYSIS

This study explores the relationship between inequality and economic growth, using annual measurements of the Gini Index and per capita GDP growth rate for 38 countries during the period 1980 - 2010. The study introduces a cluster analysis based the concept of dynamical regimes and the introduction of symbolic sequences to segment the sample into homogeneous groups of countries with similar performance with respect to the variables under analysis. During the considered period, two groups of countries are obtained: a group of high inequality and medium-high economic growth, and a second group of low inequality and low growth. Additionally, considering the relationship between economic growth and income inequality in a panel data context, a model is specified for each group, showing that the relationship between the variables depends on the dynamics of the countries. In particular, the study shows that in countries with higher per capita income there is a positive relationship between inequality and economic growth, while for emerging economies the relationship depends on the considered model.