An Assessment of the Causal Relationship between Growth and Inequality in Spanish Regions

This paper analyses the causal relationship between economic growth and income inequality in Spanish regions from 1970 to 2000. We examine such a relationship using a panel of data with four time observations on the level variables for each region. Thus, we use a modified form of traditional Granger causality tests to suit the short times series that are available. Applying a sum-difference test, we conclude that the empirical evidence supports the hypothesis that gross domestic product (GDP) per capita growth in Spanish regions leads to less income inequality, rather than any other possible causal relationship.