Land Inequality and Economic Growth: A Dynamic Panel Data Approach

The growing body of literature devoted to study the impact of inequality on economic growth have centred its attention in the income distribution effect, even though the theoretical relationships are more related to assets distributions than to income distribution. While some recent studies have tried to overcome this limitation by introducing indicators of this type, they found a new constraint when dealing only with time-invariant measurements for this explanatory variable. This article provides a theoretical discussion and some novel empirical tests to better understand the relationships between assets distribution and economic growth. We assembled a new panel database that includes observations for more than 30 countries over the last three decades. The data include a time-varying variable for changes in the Land Gini index over this period that enables to overcome the limitations of previous studies that only included time-invariant measurement. A system GMM estimator is used to generate truly unbiased and consistent regression estimates. We explore some of the likely channels through which asset distribution and economic growth may be linked, paying particular attention to the role of secure property rights and the relations between land ownership and education. We find robust and significant negative signs for land inequality in the growth regressions, indicating that changes in asset distribution are an important factor for economic development.