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Inequality is bad for growth of the poor (but not for that of the rich)

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  • Milanovic,Branko L.
  • Van Der Weide,Roy
  • Milanovic,Branko L.
  • Van Der Weide,Roy

Abstract

The paper assesses the impact of overall inequality, as well as inequality among the poor and among the rich, on the growth rates along various percentiles of the income distribution. The analysis uses micro-census data from U.S. states covering the period from 1960 to 2010. The paper finds evidence that high levels of inequality reduce the income growth of the poor and, if anything, help the growth of the rich. When inequality is deconstructed into bottom and top inequality, the analysis finds that it is mostly top inequality that is holding back growth at the bottom.

Suggested Citation

  • Milanovic,Branko L. & Van Der Weide,Roy & Milanovic,Branko L. & Van Der Weide,Roy, 2014. "Inequality is bad for growth of the poor (but not for that of the rich)," Policy Research Working Paper Series 6963, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6963
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    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Les inégalités sont bonnes pour la croissance des riches… pas pour celle des pauvres
      by ? in D'un champ l'autre on 2014-07-06 04:59:00
    2. <a href="/article/good-rich-bad-poor">Good for the rich, bad for the poor</a>
      by ? in VoxEU.org on 2014-11-30 04:46:17
    3. Inequality Grows The Incomes Of The Rich But Not The Incomes Of The Poor
      by Tim Worstall in Tim Worstall (Forbes) on 2014-11-30 17:31:00
    4. Inequality Is Bad For Income Growth Of the Poor (But Not For That of the Rich)
      by ? in Naked Capitalism on 2014-12-01 11:55:00
    5. Does inequality today hurt future growth of the poor?
      by Branko Milanovic in globalinequality on 2014-12-04 03:22:00

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    3. Milanovic, Branko, 2016. "Why might the rich be indifferent to income growth of their own countries?," Economics Letters, Elsevier, vol. 147(C), pages 108-111.
    4. Monasterolo, Irene & Raberto, Marco, 2018. "The EIRIN Flow-of-funds Behavioural Model of Green Fiscal Policies and Green Sovereign Bonds," Ecological Economics, Elsevier, vol. 144(C), pages 228-243.
    5. Francesco Savoia, 2019. "Income Inequality Convergence Across EU Regions," LIS Working papers 760, LIS Cross-National Data Center in Luxembourg.
    6. Malte Dold & Tim Krieger, 2019. "The “New” Crisis of the Liberal Order: Populism, Socioeconomic Imbalances, and the Response of Contemporary Ordoliberalism," Journal of Contextual Economics (JCE) – Schmollers Jahrbuch, Duncker & Humblot, Berlin, vol. 139(2–4), pages 243-258.
    7. Li, Y. & Murshed, S.M. & Papyrakis, E., 2021. "Public capital and income inequality: some empirical evidence," ISS Working Papers - General Series 677, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    8. Mostak Ahamed & Roxana Guti'errez-Romero, 2020. "COVID-19 response needs to broaden financial inclusion to curb the rise in poverty," Papers 2006.10706, arXiv.org.
    9. Roy van der Weide & Melinda Vigh, 2018. "Intergenerational mobility, human capital accumulation, and growth in India," WIDER Working Paper Series 187, World Institute for Development Economic Research (UNU-WIDER).
    10. Raymundo M. Campos Vázquez & Luis A. Monroy-Gómez-Franco, 2016. "La relación entre crecimiento económico y pobreza en México," Serie documentos de trabajo del Centro de Estudios Económicos 2016-01, El Colegio de México, Centro de Estudios Económicos.
    11. Manoel Bittencourt & Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "Does Financial Development Affect Income Inequality in the U.S. States? A Panel Data Analysis," Working Papers 201803, University of Pretoria, Department of Economics.
    12. Arsenio M. Balisacan, 2019. "Toward a fairer society: inequality and competition policy in developing Asia," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 56(1 and 2), pages 127-146, June and .
    13. Guillaume Allegre, 2019. "Social sustainability: from SDGs to policies," Sciences Po publications info:hdl:2441/75ruokehhl8, Sciences Po.
    14. Roy van der Weide & Melinda Vigh, 2018. "Intergenerational mobility, human capital accumulation, and growth in India," WIDER Working Paper Series wp-2018-187, World Institute for Development Economic Research (UNU-WIDER).
    15. Raouf Boucekkine & Rodolphe Desbordes & Paolo Melindi-Ghidi, 2019. "Social Divisiveness and Conflicts: Grievances Matter!," AMSE Working Papers 1906, Aix-Marseille School of Economics, France.
    16. Granaglia, Elena, 2019. "Can market inequalities be justified? The intrinsic shortcomings of meritocracy," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 284-290.
    17. Flaviana Palmisano & Ida Petrillo, 2021. "A general rank-dependent approach for distributional comparisons," Working Papers 567, ECINEQ, Society for the Study of Economic Inequality.
    18. Roy van der Weide & Ambar Narayan, 2019. "China and the United States: Different economic models but similarly low levels of socioeconomic mobility," WIDER Working Paper Series wp-2019-121, World Institute for Development Economic Research (UNU-WIDER).
    19. Bittencourt, Manoel & Chang, Shinhye & Gupta, Rangan & Miller, Stephen M., 2019. "Does financial development affect income inequality in the U.S. States?," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1043-1056.
    20. Marrero,Gustavo Alberto & Serven,Luis, 2018. "Growth, Inequality, and Poverty : A Robust Relationship?," Policy Research Working Paper Series 8578, The World Bank.
    21. Mendez Ramos,Fabian, 2019. "Uncertainty in Ex-Ante Poverty and Income Distribution : Insights from Output Growth and Natural Resource Country Typologies," Policy Research Working Paper Series 8841, The World Bank.

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    Educational Sciences; Inequality; Poverty Reduction Strategies; Labor Markets;
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