Inequality and economic growth: Trickle-down effect revisited

Abstract

The purpose of this study is to investigate the validity of trickle-down effect by using unbalanced panel data analysis for 65 countries in the period of 1995-2011. The estimation results point out that an increase in the incomes of the rich raises the incomes of the poor and vice versa. Nevertheless, it can clearly be seen that the contribution of the income transfer of the poor to the rich is more dominant than vice versa. Therefore, the invalidity of trickle-down effect can be stated for 65 countries.