The Institutional Foundations of Inequality and Growth
After a decade of research, the effect of inequality on long-run economic growth remains unresolved, in part because researchers have treated omitted variable bias as an estimation problem rather than a deeper question of causality. In this article we argue that the key omitted variable is the quality of economic institutions. Using both cross-country and panel data specifications, we find no direct effect of inequality on growth in the long-run. Rather, the protection of property rights simultaneously raises growth rates and reduces income inequality. We interpret these findings as evidence that insecure property rights disproportionately disadvantage the poor.
Volume (Year): 47 (2011)
Issue (Month): 7 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/FJDS20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/FJDS20|