Inequality, savings and consumption: a reassessment of the relationships in cointegrated panels

The effect of income inequality on savings and consumption has remained an open empirical issue despite several decades of research. Results obtained in this study indicate that income inequality, gross savings, and private consumption are unit root processes, but only inequality and private consumption are cointegrated across the sample. Inequality and gross savings are found to be cointegrated only in some countries. In addition, inequality is found to to have a negative impact on private consumption.