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Is Inequality Harmful for Growth

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  • Persson, T.
  • Tabellini, G.

Abstract

Is inequality harmful for growth? The authors suggest that it is. In a society where distributional conflict is important, political decisions produce economic policies that tax investment and growth-promoting activities in order to redistribute income. The paper formulates a theoretical model that captures this idea. The model's implications are supported by the evidence. Both historical panel data and postwar cross-sections indicate a significant and large negative relation between inequality and growth. This relation is only present in democracies. Copyright 1994 by American Economic Association.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  • Handle: RePEc:fth:stocin:537
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    Keywords

    economic growth ; tax policy ; investments;

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