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Mark Pearson Growth, Inequality and Social Protection

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  • Roman Arjona
  • Maxime Ladaique
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    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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    Bibliographic 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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    References

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    Cited by:
    1. R. Schoonackers & F. Heylen, 2011. "Fiscal Policy and TFP in the OECD: A Non-Stationary Panel Approach," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/701, Ghent University, Faculty of Economics and Business Administration.

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