Cross‐country evidence on the determinants of inclusive growth episodes

Abstract

AbstractWidening income disparities and slow productivity growth in most advanced and several emerging‐market economies have rekindled interest in the empirical analysis of the determinants of inclusive growth, defined in this paper as episodes of increases in GDP per capita without a concomitant deterioration in the distribution of household disposable income. The empirical analysis is based on a chronology of inclusive growth episodes between 1980 and 2013 for a sample of 78 countries. Logit and multinomial probit estimations show that human capital accumulation, the redistributive potential of tax‐benefit systems, increases in multifactor productivity and labor force participation, as well as trade openness and a range of institutional factors, including political system durability and electoral regimes, are important determinants of the probability of occurrence of inclusive growth. This empirical evidence contributes to the policy debate about how countries can deal with efficiency–equity tradeoffs.