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Inequality, Growth and Welfare: The Main Links

In: Growing Income Inequalities

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  • Joël Hellier
  • Stéphane Lambrecht

Abstract

Since Kuznets’ seminal article (1955), the analysis of the links between growth, development, inequality and welfare has generated a large body of economic literature. Three main questions have been addressed: 1) What is the impact of growth and development on inequality? 2) What is the impact of inequality on growth and welfare? 3) What is the impact of pro-equality policies (redistribution, tax regimes, education etc.) upon growth and welfare? Up to the early eighties, in line with Kuznets’ hypothesis (henceforth KH) economists had considered the relation between development and inequality as following an inverted-U curve. This was explained by two key mechanisms: 1) In the early stage of economic development, rising inequality essentially results from the income divergence between the traditional sector and the modern sector. Inequality then decreases when the weight of the traditional sector becomes sufficiently small. 2) When the economy reaches a certain level of development, more resources are allocated to education and redistribution, which lowers inequality.

Suggested Citation

  • Joël Hellier & Stéphane Lambrecht, 2013. "Inequality, Growth and Welfare: The Main Links," Palgrave Macmillan Books, in: Joël Hellier & Nathalie Chusseau (ed.), Growing Income Inequalities, chapter 9, pages 274-311, Palgrave Macmillan.
  • Handle: RePEc:pal:palchp:978-1-137-28330-6_10
    DOI: 10.1057/9781137283306_10
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    Cited by:

    1. Nathalie Chusseau & Joël Hellier, 2013. "Inequality in Emerging Countries," Palgrave Macmillan Books, in: Joël Hellier & Nathalie Chusseau (ed.), Growing Income Inequalities, chapter 2, pages 48-75, Palgrave Macmillan.
    2. Karine Constant & Natacha Raffin, 2016. "Environnement, croissance et inégalités : le rôle particulier du canal de la santé," Revue française d'économie, Presses de Sciences-Po, vol. 0(3), pages 9-29.
    3. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.

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    More about this item

    Keywords

    Social Capital; Human Capital; Income Inequality; Income Distribution; American Economic Review;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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