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Is Inequality Harmful for Growth?

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  • Persson, Torsten
  • Tabellini, Guido

Abstract

Is inequality harmful for growth? The authors suggest that it is. In a society where distributional conflict is important, political decisions produce economic policies that tax investment and growth-promoting activities in order to redistribute income. The paper formulates a theoretical model that captures this idea. The model's implications are supported by the evidence. Both historical panel data and postwar cross-sections indicate a significant and large negative relation between inequality and growth. This relation is only present in democracies. Copyright 1994 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 84 (1994)
Issue (Month): 3 (June)
Pages: 600-621

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Handle: RePEc:aea:aecrev:v:84:y:1994:i:3:p:600-621

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  1. Does Inequality Stunt Economic Growth?
    by vngalasso in Toppling Inequality on 2012-09-01 13:42:42
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