The Impact of Income Inequality on Economic Growth: Empirical Evidence from the Organization for Economic Co-operation and Development Member Countries

Jihene Sbaouelgi, Ghazi Boulila

Abstract: The objective of this article is to quantify the transmission channels of income inequality on economic growth for Organization for Economic Co-operation and Development member countries. We try to determine what is the most important channel through which income inequality affects growth. To do this, we will estimate our basic model with variable rates. Then, we will use a simultaneous equations model to decompose the direct and indirect effects of income inequality on economic growth. According to the results, corruption is the most important channel, while trade openness channel is the least important.

Keywords: income inequality, economic growth, transmission channels, corruption