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Mark Pearson Growth, Inequality and Social Protection

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  • Roman Arjona
  • Maxime Ladaique

Abstract

This paper attempts to clarify what trade-offs might exist between equity and growth. It is found that (i) there is not enough evidence to state definitively that inequality is either good or bad for growth, although the results cannot be taken so confidently as to rule out completely any effect; and (ii) increased social protection expenditure is bad for growth; although (iii) active social spending programs, which are designed to encourage increased employment activity by the beneficiaries, are good for growth while passive programs are bad for growth. However, since voters want both equity and growth the policy conclusion is not to cut social expenditures to boost growth but rather to shift the focus from passive to active programs. This is also supported by a different interpretation of the results, that cutting transfers encourages entry into the labour market, both increasing growth and narrowing the income distribution.

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  • Roman Arjona & Maxime Ladaique, 2003. "Mark Pearson Growth, Inequality and Social Protection," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 119-140, January.
  • Handle: RePEc:cpp:issued:v:29:y:2003:i:s1:p:119-140
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    2. Marta Simões & Adelaide Duarte & João Sousa Andrade, 2014. "Assessing the Impact of the Welfare State on Economic Growth: A Survey of Recent Developments," GEMF Working Papers 2014-20, GEMF, Faculty of Economics, University of Coimbra.
    3. Marta Simões & Adelaide Duarte & João Sousa Andrade, 2014. "Assessing the Impact of the Welfare State on Economic Growth: A Survey of Recent Developments," GEMF Working Papers 2014-20, GEMF, Faculty of Economics, University of Coimbra.
    4. Costanza Naguib, 2015. "The Relationship between Inequality and GDP Growth: an Empirical Approach," LIS Working papers 631, LIS Cross-National Data Center in Luxembourg.
    5. R. Schoonackers & F. Heylen, 2011. "Fiscal Policy and TFP in the OECD: A Non-Stationary Panel Approach," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/701, Ghent University, Faculty of Economics and Business Administration.

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