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Mark Pearson Growth, Inequality and Social Protection

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Author Info
Roman Arjona
Maxime Ladaique
Abstract

This paper attempts to clarify what trade-offs might exist between equity and growth. It is found that (i) there is not enough evidence to state definitively that inequality is either good or bad for growth, although the results cannot be taken so confidently as to rule out completely any effect; and (ii) increased social protection expenditure is bad for growth; although (iii) active social spending programs, which are designed to encourage increased employment activity by the beneficiaries, are good for growth while passive programs are bad for growth. However, since voters want both equity and growth the policy conclusion is not to cut social expenditures to boost growth but rather to shift the focus from passive to active programs. This is also supported by a different interpretation of the results, that cutting transfers encourages entry into the labour market, both increasing growth and narrowing the income distribution.

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File URL: http://economics.ca/cgi/jab?journal=cpp&view=v29s1/CPPv29s1p119.pdf
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Publisher Info
Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 29 (2003)
Issue (Month): s1 (January)
Pages: 119-140
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Handle: RePEc:cpp:issued:v:29:y:2003:i:s1:p:119-140

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  17. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
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  18. Paul Cashin, 1994. "Government Spending, Taxes, and Economic Growth," IMF Working Papers 94/92, International Monetary Fund.
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  21. Bhargava, Alok & Jamison, Dean T. & Lau, Lawrence J. & Murray, Christopher J. L., 2001. "Modeling the effects of health on economic growth," Journal of Health Economics, Elsevier, vol. 20(3), pages 423-440, May. [Downloadable!] (restricted)
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  23. Kristov, Lorenzo & Lindert, Peter & McClelland, Robert, 1992. "Pressure groups and redistribution," Journal of Public Economics, Elsevier, vol. 48(2), pages 135-163, July. [Downloadable!] (restricted)
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    Other versions:
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