In this paper, we study the relationship between changes in the world interest rate and within-country inequality during the 1985–2005 period in which the world interest rate sharply declined. In line with the predictions of the seminal model of Galor and Zeira (Income distribution and macroeconomics. Review of Economic Studies 60, 35–52), the analysis suggests that the decrease in the world interest rate is associated with a decrease in inequality in poor countries and an increase in inequality in rich ones.
World Interest Rates and Inequality: Insight from the Galor - Zeira Model
Tamara Fioroni
;
2020-01-01
Abstract
In this paper, we study the relationship between changes in the world interest rate and within-country inequality during the 1985–2005 period in which the world interest rate sharply declined. In line with the predictions of the seminal model of Galor and Zeira (Income distribution and macroeconomics. Review of Economic Studies 60, 35–52), the analysis suggests that the decrease in the world interest rate is associated with a decrease in inequality in poor countries and an increase in inequality in rich ones.
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