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Inequality of opportunity and growth

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  • Gustavo A. Marrero

    ()
    (Universidad de La Laguna)

  • Juan G. Rodríguez

    ()
    (Universidad Rey Juan Carlos)

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 returns to 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 returns to effort and growth.

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Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 154.

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Length: 43 pages
Date of creation: 2010
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Handle: RePEc:inq:inqwps:ecineq2010-154

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Keywords: income inequality; inequality of opportunity; economic growth.;

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  1. Inequality and growth
    by Economic Logician in Economic Logic on 2010-03-04 15:49:00
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Cited by:
  1. V. Peragine & F. Palmisano & P. Brunori, 2011. "Economic growth and equality of opportunity," series 0037, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Oct 2011.
  2. Paolo Brunori & Francisco H. G. Ferreira & Vito Peragine, 2013. "Inequality of Opportunity, Income Inequality and Economic Mobility: Some International Comparisons," Working Papers 284, ECINEQ, Society for the Study of Economic Inequality.
  3. Xavier Ramos & Dirk Van de gaer, 2012. "Empirical approaches to inequality of opportunity: Principles, measures, and evidence," Working Papers 259, ECINEQ, Society for the Study of Economic Inequality.
  4. 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.
  5. Aitor Calo Blanco & J. Ignacio García Pérez, 2012. "On the welfare loss caused by inequality of opportunity," Working Papers 12.12, Universidad Pablo de Olavide, Department of Economics.
  6. 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.
  7. 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.
  8. 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.
  9. 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.

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