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.

Battisti, M., Lavezzi, A.M., Fioroni, T. (2014). World Interest Rates, Inequality and Growth: an Empirical Analysis of the Galor-Zeira Model. In DISCUSSION PAPERS.

World Interest Rates, Inequality and Growth: an Empirical Analysis of the Galor-Zeira Model

BATTISTI, Michele;LAVEZZI, Andrea Mario;
2014-01-01

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.
Settore SECS-P/01 - Economia Politica
http://www.ec.unipi.it/documents/Ricerca/papers/2014-184.pdf
Battisti, M., Lavezzi, A.M., Fioroni, T. (2014). World Interest Rates, Inequality and Growth: an Empirical Analysis of the Galor-Zeira Model. In DISCUSSION PAPERS.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10447/96747
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