Growth and Income Inequality in Resource Countries:Theory and Evidence
While much ink has been spilled over the study of income inequality and economic growth,little attention has been paid to investigate the interaction between these variables of interest in resource-dependent economies. The present paper develops a two-sector small open economy model including two groups of households (the rich and the poor). The mechanismis derived by two forces: 1) a composition of productivity growth with Learning by Doing (LBD) and capital accumulation with absorptive capacity constraints on the supply-side and 2) a change in the aggregate demand of the non-traded goods with a non-homothetic preference on the demand-side. Applying a panel data approach for a sample database of 40 countries over the period 1975-2015, I evaluate the predictions of my theory. The main findings are fourfold. In response to a windfall income, first, the natural resource curse (i.e. the Dutch disease and Deindustrialization) appears. Second, income inequality rises if the non-traded sector is relatively capital-intensive while income inequality falls if the non-traded sector is relatively labor-intensive. Third, income inequality change tends to moderate the natural resource curse. Fourth, natural resource curse and income inequality change seem to be relatively more intensive in a democratic country than in a non-democratic country.
Date: 30 May 2018, 14:00 (Wednesday, 6th week, Trinity 2018)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room B
Speaker: Arsham Reisinezhad (Paris School of Economics)
Organising department: Department of Economics
Part of: OxCarre Lunchtime Seminar
Booking required?: Not required
Audience: Members of the University only
Editors: Antonella Surdi, Melis Clark