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Inequality or poverty: which is bad for growth?

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  • Robert Breunig
  • Omer Majeed

Abstract

Recent research has highlighted a negative impact of inequality on economic growth. We re-evaluate this hypothesis focusing on both inequality and poverty and their interaction. We replicate previous results showing that inequality has a negative impact on growth. However, we show that when we account for both inequality and poverty, the negative effect of inequality on growth appears to be concentrated amongst countries with high poverty. This would argue for policies targeted towards alleviating poverty rather than policies about redistribution.

Suggested Citation

  • Robert Breunig & Omer Majeed, 2016. "Inequality or poverty: which is bad for growth?," CAMA Working Papers 2016-43, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2016-43
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2016-07/43_2016_breunig_majeed.pdf
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    Cited by:

    1. Giulia Barletta & Maimuna Ibraimo & Vincenzo Salvucci & Enilde Sarmento & Finn Tarp, 2022. "The evolution of inequality in Mozambique: 1996/97-2019/20," WIDER Working Paper Series wp-2022-151, World Institute for Development Economic Research (UNU-WIDER).
    2. Mcknight, Abigail, 2019. "Understanding the relationship between poverty, inequality and growth: a review of existing evidence," LSE Research Online Documents on Economics 103458, London School of Economics and Political Science, LSE Library.
    3. Islam, Md. Rabiul & McGillivray, Mark, 2020. "Wealth inequality, governance and economic growth," Economic Modelling, Elsevier, vol. 88(C), pages 1-13.
    4. Abigail McKnight, 2019. "Understanding the relationship between poverty, inequality and growth: a review of existing evidence," CASE Papers /216, Centre for Analysis of Social Exclusion, LSE.

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    More about this item

    Keywords

    Inequality; Economic Growth; Poverty; Cross-Country Regressions;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other

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