The Role of Institutional Conditions in the Impact of Economic Growth on Income Inequality

Saeedeh Behnezhad¹, Seyed Mohammad Javad Razmi^1, and Seyed Saeed Malek Sadati¹

¹Department of Economics, Ferdowsi University of Mashhad, Mashhad, Iran

Cite this paper:
Saeedeh Behnezhad, Seyed Mohammad Javad Razmi and Seyed Saeed Malek Sadati. The Role of Institutional Conditions in the Impact of Economic Growth on Income Inequality. Journal of Finance and Economics. 2021; 9(1):11-15. doi: 10.12691/jfe-9-1-2

Abstract

Analysis of the factors determining economic growth rates, development, and economic welfare has found that structures and institutions have important effects on economic performance. They are the main cause of the differences between countries. In this regard, the present study examines the role of institutional conditions in the impact of economic growth on income inequality in countries with middle and high per capita income during 2004-2017. This study was conducted by the panel threshold method. To measure the institutional quality, the general index of good governance was used, which was obtained using the weighted average of the six governance indices of the World Bank. This model's threshold value is -0.6928, which shows that when the good governance index crosses this threshold and institutional quality improves, economic growth reduces income inequality to a greater extent.

Keywords:
institutional conditions economic growth income inequality panel threshold

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