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Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty

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Listed author(s):
  • Bagchi, Sutirtha

    ()

    (University of Michigan)

  • Svejnar, Jan

    ()

    (Columbia University)

Abstract

A fundamental question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in tackling the question, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazine's listing of billionaires and compare its effect on growth to the effects of income inequality and poverty. We find that wealth inequality reduces economic growth, but when we control for the fact that some billionaires acquired wealth through political connections, the effect of politically connected wealth inequality is negative, while politically unconnected wealth inequality, income inequality, and initial poverty have no significant effect.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7733.

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Length: 45 pages
Date of creation: Nov 2013
Handle: RePEc:iza:izadps:dp7733
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Keywords: economic growth; wealth inequality; income inequality; billionaires; political connections;

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Find related papers by JEL classification:
  • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
  • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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Cited by:

  1. Henrekson, Magnus & Sanandaji, Tino, 2017. "Schumpeterian Entrepreneurship in Europe Compared to Other Industrialized Regions," Working Paper Series 1170, Research Institute of Industrial Economics.
  2. Cragg Michael & Ghayad Rand, 2015. "Growing Apart: The Evolution of Income vs. Wealth Inequality," The Economists' Voice, De Gruyter, vol. 12(1), pages 1-12, August.
  3. Krieger, Tim & Meierrieks, Daniel, 2016. "Political capitalism: The interaction between income inequality, economic freedom and democracy," European Journal of Political Economy, Elsevier, vol. 45(C), pages 115-132.
  4. Ncube, Mthuli & Brixiova, Zuzana & Bicaba, Zorobabel, 2014. "Can Dreams Come True? Eliminating Extreme Poverty in Africa by 2030," IZA Discussion Papers 8120, Institute for the Study of Labor (IZA).
  5. AfDB AfDB, . "African Development Report 2015 - Growth, Poverty and Inequality Nexus: Overcoming Barriers to Sustainable Development," African Development Report, African Development Bank, number 2342.
  6. Gimpelson, Vladimir & Treisman, Daniel, 2015. "Misperceiving Inequality," IZA Discussion Papers 9100, Institute for the Study of Labor (IZA).
  7. Caroline Freund & Sarah Oliver, 2016. "The Origins of the Superrich: The Billionaire Characteristics Database," Working Paper Series WP16-1, Peterson Institute for International Economics.
  8. Ambar, Rabnawaz, 2015. "Corruption, Inequality and Economic Growth," MPRA Paper 70375, University Library of Munich, Germany, revised 2015.
  9. Daniel Treisman, 2016. "Russia's Billionaires," American Economic Review, American Economic Association, vol. 106(5), pages 236-241, May.
  10. Alexandra D'Onofrio & Raoul Minetti & Pierluigi Murro, 2016. "Banking development, economic structure and income inequality," CERBE Working Papers wpC08, CERBE Center for Relationship Banking and Economics.

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