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Inequality, Tolerance, and Growth

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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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  • Bjørnskov, Christian, 2004. "Inequality, Tolerance, and Growth," Working Papers 04-8, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2004_008
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    More about this item

    Keywords

    Inequality; Growth; Social Capital and Social Norms;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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