Income Inequality Is Not Harmful for Growth: Theory and Evidence
The 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. Copyright 1998 by Blackwell Publishing Ltd
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Volume (Year): 2 (1998)
Issue (Month): 3 (October)
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References listed on IDEAS
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- Atkinson, A B, 1997.
"Bringing Income Distribution in from the Cold,"
Royal Economic Society, vol. 107(441), pages 297-321, March.
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- Greenwood, Jeremy & Jovanovic, Boyan, 1988. "Financial Development, Growth, And The Distribution Of Income," Working Papers 88-12, C.V. Starr Center for Applied Economics, New York University.
- Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers 131, University of Rochester - Center for Economic Research (RCER).
- Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
- Oded Galor & Joseph Zeira, 2013.
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2013-12, Brown University, Department of Economics.
- Robert E. Hall, 1981.
"Intertemporal Substitution in Consumption,"
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0720, National Bureau of Economic Research, Inc.
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