Income Inequality Is Not Harmful for Growth: Theory and Evidence
The paper shows that income inequality may theoretically lead to higher economic growth if public consumption enters the utility function. Empirically, baseline estimations and a sensitivity analysis show that income inequality is positively, and most of the time significantly, associated with economic growth. These findings stand in sharp contrast to the negative association between inequality and growth propounded by Alesina and Rodrik and by Persson and Tabellini.
|Date of creation:||Oct 1998|
|Date of revision:|
|Publication status:||Published in Review of Development Economics, Volume 2, Issue 3, pages 318¨C334, October 1998|
|Contact details of provider:|| Web page: http://cema.cufe.edu.cn/|
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- Jeremy Greenwood & Boyan Jovanovic, 1989.
"Financial Development, Growth, and the Distribution of Income,"
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2013-12, Brown University, Department of Economics.
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