Distribution and development in developing countries : an empirical assessment

Abstract

This paper examines the effect of income distribution on growth in developing countries. Based on data from the World Bank and the United Nations Development Programme, we use a sample of twenty-eight developing economies and find that income distribution does not affect growth in these countries, unlike the results of previous studies by Alesina and Rodrik (1994). Neither do we find that the level of democracy in a country has a statistically significant impact on growth. We observe that the coefficient estimate of one independent variable does not have the anticipated sign due to the severe degree of multicollinearity among statistically significant explanatory variables. Regression results show that the total fertility rate, the initial level of per capita GDP, and the ratio of female to male literacy rate, taken together, do linearly influence growth in developing economies. Statistical results of such empirical examination will assist governments in those countries identify areas that need to be improved upon in order to stimulate economic development. Data for all variables are from the 1978 World Development Report, the World in 2007, and the 1999, 2000, and 2007/08 Human Development Reports. We apply the least-squares estimation technique in a multivariate linear regression. We also note that the severe degree of multicollinearity among explanatory variables may have caused their coefficient estimates to have the wrong sign.