World Interest Rates, Inequality and Growth: an Empirical Analysis of the Galor-Zeira Model
- Autori: Battisti, M; Lavezzi, AM; Fioroni, T
- Anno di pubblicazione: 2014
- Tipologia: Capitolo o Saggio
- OA Link: http://hdl.handle.net/10447/96747
Abstract
Following Galor and Zeira (1993), we study the effect of the world interest rate on inequality and growth for the period 1985-2005, characterized by falling world interest rates and cross-country income polarization. We argue that the two phenomena are related on th e basis of the following findings, which are in accordance with the predictions of the Galor and Zeira model: 1) a reduction of the world inter est rates increases inequality in rich countries and decreases inequ ality in poor countries; 2) inequality has a negative (and significant) eff ect on human capital accumulation in rich countries and a positive (b ut mostly not significant) effect in poor countries; 3) human capital po sitively affects GDP in both group of countries, in particular with a higher marginal effect in poor countries. The overall effect of these facts is polarization in the world income distribution.