Income Inequality and Economic Progress: An Empirical Test of the Institutionalist Approach.

This article compares income distribution and economic progress to neo-classical and neo-Keynesian schools. It aims to determine empirically whether there is a strong relationship between income distribution and economic progress. Its first section briefly examines the economic theories on the relationship between income inequality and economic progress within the framework of institutional economics. The second section contains the empirical analysis of the hypothesized relationship which involves construction of a model, description of the variables and data, and interpretation of the estimated results. A cross- national study with a sample of 65 countries is carried out. In the final section, conclusions and suggestions for further study are made. The analysis of income distribution and economic progress (or growth) in the past was largely dominated by the conventional approaches such as neo-classical and neo-Keynesian schools. However, institutionalism offers an alternative explanation, particularly on the relationship between income distribution and economic growth.