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Inequality and Growth: The Role of Beliefs and Culture

Governments perpetually align their policies to satisfy shifts in voters' relative demand for economic growth versus social equality. Following such shifts, increases (decreases) in government interventions lower (raise) both inequality and growth. This mechanism generates a positive co-movement between inequality and growth. The pattern is weaker in countries where a culturally determined belief that the rich are deserving renders equality a less important objective in the first place. I develop this analytical result in the theoretical framework of Alesina and Angeletos (2005), and I provide robust empirical support for it in a panel of 38 countries over the period 1964-2004.

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Paper provided by Lund University, Department of Economics in its series Working Papers with number 2013:15.

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Length: 43 pages
Date of creation: 24 Apr 2013
Date of revision:
Handle: RePEc:hhs:lunewp:2013_015
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Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden

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Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en

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  3. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
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  20. Kevin Lee & M. Hashem Pesaran & Ron Smith, 1998. "Growth Empirics: A Panel Data Approach—A Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 319-323.
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  24. Rachel M. McCleary & Robert J. Barro, 2006. "Religion and Economy," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 49-72, Spring.
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