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Inequality of Opportunity and Growth

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  • Gustavo A. Marrero
  • Juan G. Rodríguez

Abstract

Theoretical and empirical studies exploring the effects of income inequality upon growth reach a disappointing inconclusive result. This paper postulates that one reason for this ambiguity is that income inequality is actually a composite measure of at least two different sorts of inequality: inequality of opportunity and inequality of effort. These two types of inequality affect growth through opposite channels, so the relationship between income inequality and growth is positive or negative depending on which component is larger. We test this proposal using inequality-of- opportunity measures computed from the PSID database for 23 states of the U.S. in 1980 and 1990. We find robust support for a negative relationship between inequality of opportunity and growth, and a positive relationship between inequality of effort and growth.

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Paper provided by FEDEA in its series Working Papers with number 2009-24.

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Date of creation: Jul 2009
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Handle: RePEc:fda:fdaddt:2009-24

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  1. Inequality and growth
    by Economic Logician in Economic Logic on 2010-03-04 15:49:00
  2. Olika ojämlikheter och tillväxt
    by nonicoclolasos in Nonicoclolasos on 2010-03-13 13:25:00
  3. Is inequality good or bad?
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Cited by:
  1. Peragine, Vito & Palmisano, Flaviana & Brunori, Paolo, 2013. "Economic Growth and equality of opportunity," Policy Research Working Paper Series 6599, The World Bank.
  2. van der Weide, Roy & Milanovic, Branko, 2014. "Inequality is bad for growth of the poor (but not for that of the rich)," Policy Research Working Paper Series 6963, The World Bank.
  3. Gustavo A. Marrero & Juan G. Rodriguez, 2014. "Inequality and development: the role of opportunities and free-will," Working Papers 327, ECINEQ, Society for the Study of Economic Inequality.
  4. Brunori, Paolo & Ferreira, Francisco H. G. & Peragine, Vito, 2013. "Inequality of opportunity, income inequality and economic mobility : some international comparisons," Policy Research Working Paper Series 6304, The World Bank.
  5. Aitor Calo-Blanco & J. García-Pérez, 2014. "On the welfare loss caused by inequality of opportunity," Journal of Economic Inequality, Springer, vol. 12(2), pages 221-237, June.
  6. Pedro Olinto & Jaime Saavedra, 2012. "An Overview of Global Income Inequality Trends," World Bank - Inequality in Focus, The World Bank, vol. 1(1), pages 1-4, April.
  7. RAMOS, Xavier & VAN DE GAER, Dirk, 2012. "Empirical approaches to inequality of opportunity: principles, measures, and evidence," CORE Discussion Papers 2012026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Francisco Ferreira & Jérémie Gignoux & Meltem Aran, 2011. "Measuring inequality of opportunity with imperfect data: the case of Turkey," Journal of Economic Inequality, Springer, vol. 9(4), pages 651-680, December.
  9. Narayan, Ambar & Saavedra-Chanduvi, Jaime & Tiwari, Sailesh, 2013. "Shared prosperity : links to growth, inequality and inequality of opportunity," Policy Research Working Paper Series 6649, The World Bank.
  10. Luis F. Lopez-Calva, 2012. "Declining Income Inequality in Brazil: The Proud Outlier," World Bank - Inequality in Focus, The World Bank, vol. 1(1), pages 5-8, April.
  11. Francisco H.G. Ferreira, 2012. "Inequality of Opportunity Around the World: What Do We Know So Far?," World Bank - Inequality in Focus, The World Bank, vol. 1(1), pages 8 - 11, April.

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