Hi guys,

I am looking into the effect of inequality on economic growth using panel estimation.

When I include gini^2 in my regression as well as gini, the coefficient on gini becomes significant but without including the squared term it is extremely insignificant.

Regression: gdpgrowth = gini + gini^2 + educ variable + dummy variables... etc

The gini coefficient is positive but the gini^2 is negative. I understand that this means the relationship can be represented by an inverted U-shape (i.e inequality has positive effect with low levels of gdpgrowth but negative at higher levels)

BUT i don't understand why including gini^2 drastically changes the significance of the results???

Any help would be greatly appreciated!