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Distribution and Growth

The main aim of this project is to find out if there is a relationship between inequality and growth, and if so, point out what the mechanism is behind such a relationship.

language english
wordcount 9244 (cca 26 pages)
contextual quality N/A
language level N/A
price free
sources 6
Table of contents

Pages 1-3 :Section 1  -Introduction and initial model
Pages 4-10-Section 2:Theory
Pages 10-15-Section 3: Oanel data

Preview of the essay: Distribution and Growth

In this section, we shall base our analysis on the paper, “Distributive Politics and Economic Growth”, by Alberto Alesina and Dani Rodrik. The basic implication of their model is that the more unequal the distribution of resources in society, the lower the rate of economic growth. This is because the capital taxation rate will be higher than the growth maximising rate in order to fund redistribution. Our aim is to arrive at the same regression result as Alesina and Rodrik. There will be a sub-section devoted to comparing our estimates with the original study, and then we will test for the existence of heteroskedasticity in our model using the Breusch-Pagan test. We will also carry out an F-test to test the significance of the explanatory variables in the model.

We will be using a sample from “The Data Set for a Panel of 138 Countries” by Robert Barro and Jong-Wha Lee, which ...

... growth may be difficult to explain due to the major differences in countries studied. The level and size of urbanisation may be very different across countries and across time. Studies may be better geared towards studying similar types of countries based on certain criteria and trying to find a relationship with these countries as comparing a lot of very different countries may find very differing and inconclusive results. There are also a number of other factors that could be important in a country’s overall growth and these need to be considered as well.
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