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Trends in Income Inequality and Its Impact on Economic Growth

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  • Reka Vitkovics

    (ESIC Business & Marketing School)

Abstract

In recent years, climate change and the pandemic have brought the issue of the link between inequality and economic growth to the fore. In my essay, I examine this relationship, focusing on whether inequality has a positive or negative effect on economic growth. I approach the issue through the lens of income inequality without seeking to explore all aspects of inequality. Starting from the relevant conceptual framework, I present the link between global inequality and long-term growth. Since inequalities affect both developed and developing countries, I compare them and show why the latter cannot repeat the economic progress achieved by earlier industrialisers. Finally, I conclude that the clear objective should be to reduce excessive inequalities.

Suggested Citation

  • Reka Vitkovics, 2023. "Trends in Income Inequality and Its Impact on Economic Growth," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 22(4), pages 136-159.
    • Handle: RePEc:mnb:finrev:v:22:y:2023:i:4:p:136-159
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    References listed on IDEAS

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    1. Suresh D. Tendulkar & L.R. Jain, 1995. "Economic Growth, Relative Inequality, and Equity: The Case of India," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 138-168.
    2. Mulligan, Casey B., 2012. "The Redistribution Recession: How Labor Market Distortions Contracted the Economy," OUP Catalogue, Oxford University Press, number 9780199942213.
    3. Mr. Jonathan David Ostry & Mr. Andrew Berg & Mr. Charalambos G Tsangarides, 2014. "Redistribution, Inequality, and Growth," IMF Staff Discussion Notes 2014/002, International Monetary Fund.
    4. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    5. Jonathan David Ostry & Andrew Berg & Charalambos G Tsangarides, 2014. "Redistribution, Inequality, and Growth," IMF Staff Discussion Notes 14/02, International Monetary Fund.
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    Cited by:

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    More about this item

    Keywords

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    JEL classification:

    • B55 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Social Economics
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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