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Inequality, Tolerance, and Growth

This paper argues for the importance of individuals’ tolerance of inequality for economic growth. By using the political ideology of governments as a measure of revealed tolerance of inequality, the paper shows that controlling for ideology improves the accuracy with which the effects of inequality are measured. Results show that inequality reduces growth but more so in societies where people perceive it as being relatively unfair. Further results indicate that legal quality and social trust are likely transmission channels for the effects of inequality.

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File URL: http://www.hha.dk/nat/wper/04-8_chbj.pdf
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 04-8.

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Length: 34 pages
Date of creation: 27 May 2004
Date of revision:
Handle: RePEc:hhs:aareco:2004_008
Contact details of provider: Postal:
The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx

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  1. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
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  4. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  5. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
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  8. North, Douglass C., 1993. "Economic Performance through Time," Nobel Prize in Economics documents 1993-2, Nobel Prize Committee.
  9. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  10. Nauro F. Campos & Jeffrey B. Nugent, 2001. "Who Is Afraid Of Political Instability?," Development and Comp Systems 0012016, EconWPA.
  11. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  12. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
  13. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  14. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  15. Summers, Robert & Heston, Alan, 1988. "A New Set of International Comparisons of Real Product and Price Levels Estimates for 130 Countries, 1950-1985," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(1), pages 1-25, March.
  16. Guido Enrico Tabellini & Torsten Persson, 1991. "Growth, Distribution and Politics," IMF Working Papers 91/78, International Monetary Fund.
  17. Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April.
  18. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  19. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  20. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January.
  21. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
  22. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  23. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  24. Mo, Pak Hung, 2000. "Income Inequality and Economic Growth," Kyklos, Wiley Blackwell, vol. 53(3), pages 293-315.
  25. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  26. Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
  27. Keefer, Philip & Knack, Stephen, 2002. "Polarization, Politics and Property Rights: Links between Inequality and Growth," Public Choice, Springer, vol. 111(1-2), pages 127-54, March.
  28. Scully, Gerald W, 2002. "Economic Freedom, Government Policy and the Trade-Off between Equity and Economic Growth," Public Choice, Springer, vol. 113(1-2), pages 77-96, October.
  29. Paul F. Whiteley, 2000. "Economic Growth and Social Capital," Political Studies, Political Studies Association, vol. 48(3), pages 443-466, 06.
  30. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
  31. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  32. Paula K. Lorgelly & P. Dorian Owen, 1999. "The effect of female and male schooling on economic growth in the Barro-Lee model," Empirical Economics, Springer, vol. 24(3), pages 537-557.
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