Effects of Income Distribution on Growth

Several theories hold that income distribution affects economic growth. Some of them use cross-section country regression analysis to demonstrate their beliefs. This procedure has such a bulk of problems that its results should be analyzed carefully. Theories supported by this kind of empirical verification are most affected. Results suggest that a relationship between income distribution and economic growth exists but it seems to be nonlinear, complex and dynamic. Alternative statistical methods can be used in combination with historical studies and case studies, where institutions are included, for a better understanding of prevalent linkages.