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Growth, Inequality, and Social Welfare: Cross-Country Evidence

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  • David Dollar
  • Tatjana Kleineberg
  • Aart Kraay

Abstract

We use social welfare functions that assign weights to individuals based on their income levels to document the relative importance of growth and inequality changes for changes in social welfare. In a large panel of industrial and developing countries over the past 40 years, we find that most of the cross-country and over-time variation in changes in social welfare is due to changes in average incomes. In contrast, the changes in inequality observed during this period are on average much smaller than changes in average incomes, are uncorrelated with changes in average incomes, and have contributed relatively little to changes in social welfare.

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  • David Dollar & Tatjana Kleineberg & Aart Kraay, 2014. "Growth, Inequality, and Social Welfare: Cross-Country Evidence," LIS Working papers 626, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:626
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    References listed on IDEAS

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