A Bayesian Reappraisal of the Inequality–Growth Relationship

Roy, Subaran ORCID: https://orcid.org/0000-0001-6764-2815 and Sethi, Keshav ORCID: https://orcid.org/0009-0001-8395-6790 (2026) A Bayesian Reappraisal of the Inequality–Growth Relationship. Journal of Quantitative Economics. Springer International Publishing . ISSN 2364-1045 (In Press) Available at: https://doi.org/10.1007/s40953-026-00535-4

Full text not available from this repository. (Request a copy)

Abstract

This paper re-examines the relationship between income inequality and economic growth for a panel of 56 countries over the period 1999–2020 using a Bayesian Model Averaging (BMA) framework. The analysis explicitly addresses model uncertainty by evaluating 32,768 alternative model specifications and further employs Extreme Bounds Analysis (EBA) and dynamic BMA estimations to examine robustness and potential endogeneity. The empirical results consistently indicate that income inequality exerts a negative effect on economic growth. In the baseline specification, the Gini coefficient records a posterior mean of -0.073, a Posterior Inclusion Probability (PIP) of 0.968, and a posterior mean to posterior standard deviation ratio of 2.92, implying that inequality is both a statistically credible and economically robust determinant of growth. The adverse effect of inequality remains stable across alternative priors, alternative growth measures, and dynamic specifications. The EBA results also show that the vast majority of estimated inequality coefficients are negative in alternative model combinations. Overall, the results provide strong support for the view that persistent income inequality is an important constraint on long-run economic growth, and they highlight the importance of policies aimed at promoting more inclusive growth processes.

Item Type: Article
Uncontrolled Keywords: Inequality | Economic Growth | Model Uncertainty | Bayesian Moving Averaging
Subjects: Social Sciences and humanities > Social Sciences > Sociology
Depositing User: Mr. Syed Anas Ali
Date Deposited: 07 Jul 2026 10:48
Last Modified: 24 Sep 2026 05:45
Official URL: https://doi.org/10.1007/s40953-026-00535-4
URI: https://pure.jgu.edu.in/id/eprint/11949

Downloads

Downloads per month over past year

Actions (login required)

View Item
View Item