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Inequality, Human Capital Formation and the Process of Development

Conventional wisdom about the relationship between income distribution and economic development has been subjected to dramatic transformations in the past century. While Classical economists advanced the hypothesis that inequality is beneficial for economic development, the Neoclassical paradigm, which had subsequently dominated the field of macroeconomics, dismissed the Classical hypothesis and promoted the viewpoint that the study of income distribution has no importance for the understanding of macroeconomic activity and the growth process. A metamorphosis in these perspectives has taken place in the past two decades. Theory and subsequent empirical evidence have demonstrated that income distribution has a significant impact on the growth process.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2011-7.

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Date of creation: 2011
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Handle: RePEc:bro:econwp:2011-7
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Department of Economics, Brown University, Providence, RI 02912

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