Income Inequality Is Not Harmful for Growth: Theory and Evidence
AbstractThe paper shows that income inequality may theoretically lead to higher economic growth if public consumption enters the utility function. Empirically, baseline estimations and a sensitivity analysis show that income inequality is positively, and most of the time significantly, associated with economic growth. These findings stand in sharp contrast to the negative association between inequality and growth propounded by Alesina and Rodrik and by Persson and Tabellini.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 74.
Length: 17 pages
Date of creation: Oct 1998
Date of revision:
Publication status: Published in Review of Development Economics, Volume 2, Issue 3, pages 318¨C334, October 1998
Other versions of this item:
- Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-34, October.
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117, Economics Group, Nuffield College, University of Oxford.
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