Abstract
The relations between income inequality and economic growth have long been discussed by economists. While the Kuznets inverted-U used to be the focus of the discussions, in recent years there is an evident trend toward investigating whether inequality retards economic growth. The redistributive policy is also an important element in the inequality-growth nexus, but it is less touched in the existing literature. As a result, I simultaneously study the impact of income inequality and income redistribution on economic growth in this thesis. Most importantly, a country’s political institution is taken into account in the analysis, given that the political institution might play an important role in determining the impact of income inequality, redistribution, on economic growth. The major findings of this thesis are: (1) In general, income inequality has a negative impact on economic growth while redistribution has positive influence on economic growth. (2) In democratic countries inequality (redistribution) is negatively (positively) and significantly associated with economic growth; however, in autocratic countries only inequality has negative and significant impact on growth. (3) There are no significant changes in the main results when various time dummy variables are added to control the fluctuations from business cycles.