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Inequality and Growth: A Review on a Great Open Debate in Economics

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  • Baselgia, Enea
  • Foellmi, Reto

Abstract

What is the relationship between inequality and growth? This question has occupied and fascinated social scientists for more than a century. We review critically the recent empirical and theoretical literature on the complex interplay between inequality and economic growth. Inequality might come in many forms: (top) incomes, wages, wealth, land or opportunities. At the same time, growth performance could be measured as average growth rates, variability of growth or the potential for growth to "take off''. This paper considers causality running from inequality to growth; hence, the Kuznets hypothesis is only touched on in passing. The empirical literature estimating the effect of inequality on growth has produced a wide range of results, precluding clear-cut conclusions on the inequality-growth relationship. Consequently, it remains central to understand the underlying economic causes and channels through which (different aspects of) inequality can promote or hamper economic growth. This paper aims to provide a broad overview of the contemporary results and an outline for prospective empirical and theoretical work.

Suggested Citation

  • Baselgia, Enea & Foellmi, Reto, 2022. "Inequality and Growth: A Review on a Great Open Debate in Economics," CEPR Discussion Papers 17483, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:17483
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    2. Seyed Armin Motahar & Masoud Yahoo, 2025. "The Key Inequality Indicators Forecasting Economic Growth Under Heterogeneity and Nonlinearity: A Machine Learning Approach," SAGE Open, , vol. 15(2), pages 21582440251, June.
    3. Tanadej Vechsuruck, 2025. "Justice Matters: Equality-Efficiency Tradeoff in Principles of Macroeconomics," Review of Radical Political Economics, Union for Radical Political Economics, vol. 57(3), pages 503-512, September.
    4. Hai‐Anh H. Dang & Shatakshee Dhongde & Minh N. N. Do & Cuong Viet Nguyen & Obert Pimhidzai, 2025. "Rapid Economic Growth but Rising Poverty Segregation: Will Vietnam Meet the SDGs for Equitable Development?," Review of Development Economics, Wiley Blackwell, vol. 29(4), pages 2063-2075, November.
    5. David Castells-Quintana & Carlos Gradín & Vicente Royuela, 2022. "Inequality and human development: The role of different parts of the income distribution," WIDER Working Paper Series wp-2022-96, World Institute for Development Economic Research (UNU-WIDER).
    6. Ivan D. Trofimov, 2024. "Is there a Kuznets curve for cropland use? The evidence from international panel data," Natural Resources Forum, Blackwell Publishing, vol. 48(1), pages 232-256, February.
    7. Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick & Wang, Hankui, 2025. "UK Economic Growth and Inequality from 1870," Cardiff Economics Working Papers E2025/7, Cardiff University, Cardiff Business School, Economics Section.
    8. Oscar Claveria, 2024. "Redistribution and human development: evidence from Europe," Economics and Business Letters, Oviedo University Press, vol. 13(2), pages 68-81.
    9. Gradín, Carlos, 2024. "Revisiting the trends in global inequality," World Development, Elsevier, vol. 179(C).
    10. Seyed Armin Motahar & Siab Mamipour, 2026. "The Impact of Wealth Inequality on Economic Growth: A Machine Learning Approach," Computational Economics, Springer;Society for Computational Economics, vol. 67(2), pages 1233-1258, February.

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    Keywords

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    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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