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Inequality and Unsustainable Growth: Two Sides of the Same Coin?

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  • Andrew G. Berg

    (International Monetary Fund)

  • Jonathan D. Ostry

    (International Monetary Fund)

Abstract

The relationship between income inequality and economic growth is complex and the evidence mixed. This paper focuses on the connections between income inequality and the fragility of economic growth. We find that longer growth spells—periods of strong, healthy, per capita growth—are robustly associated with more equality in the income distribution, even when controlling for a range of other standard determinants. A key implication is that it would be a gamble to think that distribution will take care of itself provided policy makers steadfastly pursue growth. Over longer horizons, avoiding excessive inequality and sustaining economic growth may be two sides of the same coin.

Suggested Citation

  • Andrew G. Berg & Jonathan D. Ostry, 2017. "Inequality and Unsustainable Growth: Two Sides of the Same Coin?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(4), pages 792-815, November.
  • Handle: RePEc:pal:imfecr:v:65:y:2017:i:4:d:10.1057_s41308-017-0030-8
    DOI: 10.1057/s41308-017-0030-8
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    2. Herr, Hansjörg, 2018. "Underdevelopment and unregulated markets: Seven reasons why unregulated markets reproduce underdevelopment," IPE Working Papers 103/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    3. Thorvaldur Gylfason, 2018. "Ten Years After: Iceland's Unfinished Business," CESifo Working Paper Series 7318, CESifo.
    4. Aiyar, Shekhar & Ebeke, Christian, 2020. "Inequality of opportunity, inequality of income and economic growth," World Development, Elsevier, vol. 136(C).
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    6. Gupta, Shivani & Das, Sukanya & Murty, M. N., 2019. "Quantifying Air Pollution Vulnerability and its Distributional Consequences: Some Perspectives from Delhi," Ecology, Economy and Society - the INSEE Journal, Indian Society of Ecological Economics (INSEE), vol. 2(01), January.
    7. Tian Aw Yong, 2020. "Wealth Inequality, Governance and Economic Growth in China," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 7(2), pages 235-241.
    8. Hansjörg Herr & Bea Ruoff, 2018. "Insufficient Economic Convergence in the World Economy: How Do Economists Explain Why Too Many Countries Do Not Catch-up?," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 7(1), pages 1-27, April.
    9. Bhuyan, Biswabhusan & Sahoo, Bimal Kishore & Suar, Damodar, 2020. "Nutritional status, poverty, and relative deprivation among socio-economic and gender groups in India: Is the growth inclusive?," World Development Perspectives, Elsevier, vol. 18(C).
    10. Nicholas Apergis & Christina Christou & Rangan Gupta & Stephen M. Miller, 2018. "Convergence in Income Inequality: Further Evidence from the Club Clustering Methodology across States in the U.S," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(2), pages 147-161, May.
    11. Chigudu, Andrew, 2021. "The Changing Institutional and Legislative Planning Framework of Zambia and Zimbabwe: Nuances for Urban Development," Land Use Policy, Elsevier, vol. 100(C).
    12. Gil-Alana, Luis A. & Škare, Marinko & Pržiklas-Družeta, Romina, 2019. "Measuring inequality persistence in OECD 1963–2008 using fractional integration and cointegration," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 65-72.
    13. Can Sever & Emekcan Yucel, 2021. "Electoral Cycles in Inequality Abstract:," Working Papers 2021/01, Bogazici University, Department of Economics.
    14. Thorvaldur Gylfason, 2019. "Inequality Undermines Democracy and Growth," CESifo Working Paper Series 7486, CESifo.
    15. José De Gregorio, 2018. "Productivity in Emerging-Market Economies: Slowdown or Stagnation?," Working Paper Series WP18-12, Peterson Institute for International Economics.
    16. Thorvaldur Gylfason, 2019. "From Equality, Democracy, and Public Health to Economic Prosperity," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(02), pages 28-33, August.
    17. Johan Graafland & Bjorn Lous, 2019. "Income Inequality, Life Satisfaction Inequality and Trust: A Cross Country Panel Analysis," Journal of Happiness Studies, Springer, vol. 20(6), pages 1717-1737, August.
    18. Chhavi Tiwari & Sankalpa Bhattacharjee & Debkumar Chakrabarti, 2020. "Investigating Regional Inequalities in India: Are Indian Districts Converging?," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(5), pages 684-716, July.
    19. Herr, Hansjörg & Dünhaupt, Petra, 2019. "Global Value Chains in economic development," IPE Working Papers 124/2019, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    20. Anping Chen & Nicolaas Groenewold, 2019. "Macroeconomic shocks in China: Do the distributional effects depend on the regional source?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 69-97, February.
    21. Simona ILIE, 2020. "Income Inequalities in Romania in the Aftermath of the 2008 Economic Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 115-130, July.
    22. Tomáš Domonkos, 2020. "Nerovnosti a ekonomický rast v krajinách Európskej únie [Inequalities and Economic Growth in EU Countries]," Politická ekonomie, Prague University of Economics and Business, vol. 2020(4), pages 405-422.
    23. Sanjeev Gupta & João Tovar Jalles, 2020. "Tax Revenue Reforms and Income Distribution in Developing Countries," Working Papers REM 2020/0137, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

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    More about this item

    Keywords

    O1; O4;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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