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Does wealth inequality matter for growth? The effect of billionaire wealth, income distribution, and poverty

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  • Bagchi, Sutirtha
  • Svejnar, Jan

Abstract

A fundamental question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in tackling the question, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazine's listing of billionaires and compare its effect on growth to the effects of income inequality and poverty. Our results suggest that wealth inequality has a negative relationship with economic growth, but when we control for the fact that some billionaires acquired wealth through political connections, the relationship between politically connected wealth inequality and economic growth is negative, while politically unconnected wealth inequality, income inequality, and initial poverty have no significant relationship.

Suggested Citation

  • Bagchi, Sutirtha & Svejnar, Jan, 2015. "Does wealth inequality matter for growth? The effect of billionaire wealth, income distribution, and poverty," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 505-530.
  • Handle: RePEc:eee:jcecon:v:43:y:2015:i:3:p:505-530
    DOI: 10.1016/j.jce.2015.04.002
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    Cited by:

    1. Chatterjee Aroop, 2019. "Measuring wealth inequality in South Africa: An agenda," WIDER Working Paper Series wp-2019-45, World Institute for Development Economic Research (UNU-WIDER).
    2. Ncube, Mthuli & Brixiova, Zuzana & Bicaba, Zorobabel, 2014. "Can Dreams Come True? Eliminating Extreme Poverty in Africa by 2030," IZA Discussion Papers 8120, Institute of Labor Economics (IZA).
    3. Krieger, Tim & Meierrieks, Daniel, 2016. "Political capitalism: The interaction between income inequality, economic freedom and democracy," European Journal of Political Economy, Elsevier, vol. 45(C), pages 115-132.
    4. repec:bla:ecopol:v:30:y:2018:i:1:p:27-54 is not listed on IDEAS
    5. repec:ses:arsjes:2017-iii-1 is not listed on IDEAS
    6. AfDB AfDB, . "African Development Report 2015 - Growth, Poverty and Inequality Nexus: Overcoming Barriers to Sustainable Development," African Development Report, African Development Bank, number 2342.
    7. Iftekhar Hasan & Roman Horvath & Jan Mares, 2018. "Finance and Wealth Inequality," Working Papers 378, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    8. repec:spr:sjecst:v:153:y:2017:i:3:d:10.1007_bf03399507 is not listed on IDEAS
    9. Henrekson, Magnus & Sanandaji, Tino, 2017. "Schumpeterian Entrepreneurship in Europe Compared to Other Industrialized Regions," Working Paper Series 1170, Research Institute of Industrial Economics, revised 29 Jun 2018.
    10. Vladimir Gimpelson & Daniel Treisman, 2018. "Misperceiving inequality," Economics and Politics, Wiley Blackwell, vol. 30(1), pages 27-54, March.
    11. Sutirtha Bagchi & Michael Patrick Curran & Matthew J. Fagerstrom, 2019. "What is the Impact of Monetary Policy on Wealth Inequality?," Villanova School of Business Department of Economics and Statistics Working Paper Series 39, Villanova School of Business Department of Economics and Statistics.
    12. repec:eee:jeborg:v:157:y:2019:i:c:p:428-451 is not listed on IDEAS
    13. Alexander Krenek & Margit Schratzenstaller, 2018. "A European Net Wealth Tax," WIFO Working Papers 561, WIFO.
    14. Caroline Freund & Sarah Oliver, 2016. "The Origins of the Superrich: The Billionaire Characteristics Database," Working Paper Series WP16-1, Peterson Institute for International Economics.
    15. Cragg Michael & Ghayad Rand, 2015. "Growing Apart: The Evolution of Income vs. Wealth Inequality," The Economists' Voice, De Gruyter, vol. 12(1), pages 1-12, August.
    16. Ambar, Rabnawaz, 2015. "Corruption, Inequality and Economic Growth," MPRA Paper 70375, University Library of Munich, Germany, revised 2015.
    17. repec:bla:revinw:v:64:y:2018:i:s1:p:s145-s188 is not listed on IDEAS
    18. Marco Ioffredi, 2018. "Income Inequality and Economic Growth: Decomposing the Effects of the Income Distribution," LIS Working papers 751, LIS Cross-National Data Center in Luxembourg.
    19. Meenagh, David & Minford, Patrick & Yang, Xiaoliang, 2018. "A heterogeneous-agent model of growth and inequality for the UK," Cardiff Economics Working Papers E2018/17, Cardiff University, Cardiff Business School, Economics Section.
    20. Daniel Treisman, 2016. "Russia's Billionaires," American Economic Review, American Economic Association, vol. 106(5), pages 236-241, May.
    21. repec:eee:jcecon:v:46:y:2018:i:4:p:920-935 is not listed on IDEAS
    22. Alexandra D'Onofrio & Pierluigi Murro, 2013. "Local banking development and income distribution across Italian provinces," Working Papers CASMEF 1307, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    23. repec:wsi:serxxx:v:62:y:2017:i:02:n:s0217590815501167 is not listed on IDEAS

    More about this item

    Keywords

    Economic growth; Wealth inequality; Income inequality; Billionaires; Political connections;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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