Inequality is Bad for Growth of the Poor (But Not for that of the Rich)

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.

[1]  F. Ferreira,et al.  Inequality of Opportunity and Economic Growth: How Much Can Cross‐Country Regressions Really Tell Us? , 2018 .

[2]  J. Gagné.  Literature Review , 2018, Journal of ultrasound in medicine : official journal of the American Institute of Ultrasound in Medicine.

[3]  Raj Chetty,et al.  The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment , 2015, The American economic review.

[4]  Aart C. Kraay.  Weak Instruments in Growth Regressions: Implications for Recent Cross-Country Evidence on Inequality and Growth , 2015 .

[5]  A. Haldane,et al.  Capital in the 21st Century , 2015 .

[6]  E. Watson.  Testing Theories of American Politics , 2015 .

[7]  S. Jenkins.  World income inequality databases: an assessment of WIID and SWIID , 2015, SSRN Electronic Journal.

[8]  D. West.  Billionaires: Reflections on the Upper Crust , 2014 .

[9]  Benjamin I. Page,et al.  Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens , 2014, Perspectives on Politics.

[10]  F. Ferreira,et al.  Inequality of Opportunity and Economic Growth: A Cross-Country Analysis , 2014 .

[11]  J. Ostry,et al.  Redistribution, Inequality, and Growth , 2014 .

[12]  Nicholas Sambanis,et al.  Explaining Regional Autonomy Differences in Decentralized Countries , 2014 .

[13]  Raj Chetty,et al.  Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States* , 2014 .

[14]  E. Ceesay,et al.  Inequality and growth , 2013 .

[15]  Emmanuel Saez,et al.  The Top 1 Percent in International and Historical Perspective , 2013 .

[16]  Gordon H. Hanson,et al.  Untangling Trade and Technology: Evidence from Local Labour Markets , 2013, SSRN Electronic Journal.

[17]  Michael A. Clemens,et al.  Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth , 2013 .

[18]  Vasilis Sarafidis,et al.  Dynamic panel data models , 2013 .

[19]  Jason Seawright,et al.  Democracy and the Policy Preferences of Wealthy Americans , 2013, Perspectives on Politics.

[20]  Gordon H. Hanson,et al.  The China Syndrome: Local Labor Market Effects of Import Competition in the United States , 2012, SSRN Electronic Journal.

[21]  David Dorn,et al.  ABSTRACT The Growth of Low Skill Service Jobs and the Polarization of the U.S. Labor Market , 2012 .

[22]  Juan Gabriel Rodríguez,et al.  Inequality of Opportunity in Europe , 2012 .

[23]  D. Roodman.  Doubts about the evidence that foreign aid for health is displaced into non-health uses , 2012, The Lancet.

[24]  I. Koske,et al.  Less Income Inequality and More Growth – Are they Compatible? Part 8. The Drivers of Labour Income Inequality – A Literature Review , 2012 .

[25]  David Autor,et al.  The Growth of Low Skill Service Jobs and the Polarization of the U.S. Labor Market , 2009, SSRN Electronic Journal.

[26]  L. Brandt,et al.  Did Higher Inequality Impede Growth in Rural China? , 2010 .

[27]  J. Zweimüller,et al.  Inequality and growth: the neglected time dimension , 2010, Journal of Economic Growth.

[28]  G. A. Marrero.  Inequality Of Opportunity And Growth , 2013 .

[29]  Oded Galor.  Inequality and Economic Development: The Modern Perspective , 2009 .

[30]  M. Ravallion.  Why Don't We See Poverty Convergence? , 2009 .

[31]  G. David Roodman.  PRACTITIONERS' CORNER A Note on the Theme of Too Many Instruments Å , 2009 .

[32]  Oded Galor.  Inequality and Economic Development: An Overview , 2009 .

[33]  David Roodman,et al.  A Note on the Theme of Too Many Instruments , 2008 .

[34]  David H. Autor,et al.  Trends in U.S. Wage Inequality: Revising the Revisionists , 2008, The Review of Economics and Statistics.

[35]  William Easterly.  Inequality does cause underdevelopment: Insights from a new instrument ☆ , 2007 .

[36]  Emmanuel Saez,et al.  How progressive is the US federal tax system? A historical and international perspective , 2007 .

[37]  Tuomas Malinen.  A Comment on the Relationship between Inequality and Growth , 2007 .

[38]  A. Atkinson,et al.  A COMMENT ON THE RELATIONSHIP BETWEEN INEQUALITY AND GROWTH , 2007 .

[39]  Kenneth L. Sokoloff,et al.  Inequality and Taxation: Evidence from the Americas on how Inequality may Influence Tax Institutions , 2007 .

[40]  Nicholas Sambanis,et al.  Sensitivity Analysis of Empirical Results on Civil War Onset , 2006 .

[41]  F. Ferreira,et al.  Local Inequality and Project Choice: Theory and Evidence from Ecuador , 2006 .

[42]  Emmanuel Saez,et al.  How Progressive is the U.S. Federal Tax System? A Historical and International Perspective , 2006 .

[43]  Henri L. F. de Groot,et al.  Growth and Inequality: A Meta-Analysis , 2006 .

[44]  Sarah Voitchovsky,et al.  Does the Profile of Income Inequality Matter for Economic Growth? , 2005 .

[45]  Stephen Knowles,et al.  Inequality and Economic Growth: The Empirical Relationship Reconsidered in the Light of Comparable Data , 2005 .

[46]  M. Pesaran,et al.  ESTIMATION AND INFERENCE IN SHORT PANEL VECTOR AUTOREGRESSIONS WITH UNIT ROOTS AND COINTEGRATION , 2000, Econometric Theory.

[47]  B. Hobijn,et al.  Federal Reserve Bank of New York Staff Reports Inflation Inequality in the United States Bart Hobijn , 2003 .

[48]  Marcelo J. Moreira.  A Conditional Likelihood Ratio Test for Structural Models , 2003 .

[49]  Emmanuel Saez,et al.  Income inequality in the United States , 2003 .

[50]  Emmanuel Saez,et al.  Income inequality in the United States , 2003 .

[51]  R. Paap,et al.  Generalized Reduced Rank Tests Using the Singular Value Decomposition , 2003 .

[52]  J. Kiviet,et al.  The Effects of Dynamic Feedbacks on Ls and Mm Estimator Accuracy in Panel Data Models , 2002 .

[53]  Frank Kleibergen,et al.  Testing Parameters in GMM without Assuming that they are identified , 2005 .

[54]  A. Atkinson,et al.  Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study , 2001 .

[55]  F. Ferreira,et al.  Education for the masses? The interaction between wealth, educational and political inequalities , 2001 .

[56]  Oded Galor,et al.  From Physical to Human Capital Accumulation: Inequality in the Process of Development , 2002 .

[57]  B. Milanovic,et al.  The median voter hypothesis, income inequality and income , 2000 .

[58]  Esther Duflo,et al.  Inequality and Growth: What Can the Data Say? , 2000 .

[59]  Roland Bénabou,et al.  Unequal Societies: Income Distribution and the Social Contract , 2000 .

[60]  R. Barro.  Inequality and Growth in a Panel of Countries , 2000 .

[61]  Kristin J. Forbes,et al.  A Reassessment of the Relationship between Inequality and Growth , 2000 .

[62]  Huw Lloyd-Ellis.  Public Education, Occupational Choice, and the Growth-Inequality Relationship , 2000 .

[63]  Eve Caroli,et al.  Inequality and Economic Growth: The Perspective of the New Growth Theories , 1999 .

[64]  Stephen F. Knack,et al.  Polarization, Politics and Property Rights: Links Between Inequality and Growth , 1999 .

[65]  U. Panizza.  Income Inequality and Economic Growth: Evidence from American Data , 1999 .

[66]  A. Alesina,et al.  Participation in Heterogeneous Communities , 1999 .

[67]  H. Zou,et al.  Income Inequality is Not Harmful for Growth: Theory and Evidence , 1998 .

[68]  H. Zou,et al.  Explaining International and Intertemporal Variations in Income Inequality , 1998 .

[69]  M. Partridge.  Is inequality harmful for growth? Comment , 1997 .

[70]  Klaus Deininger,et al.  A New Data Set Measuring Income Inequality , 1996 .

[71]  Roberto Perotti.  Growth, income distribution, and democracy: What the data say , 1996 .

[72]  Roland Bénabou,et al.  Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance , 1996 .

[73]  R. Blundell,et al.  Initial Conditions and Moment Restrictions in Dynamic Panel Data Models , 1998 .

[74]  G. Tabellini,et al.  Is Inequality Harmful for Growth , 1994 .

[75]  Torsten Persson,et al.  Is Inequality Harmful for Growth? Theory and Evidence , 1991 .

[76]  Joseph Zeira,et al.  Income Distribution and Macroeconomics , 1988 .

[77]  Allan H. Meltzer,et al.  Tests of a rational theory of the size of government , 1983 .

[78]  Allan H. Meltzer,et al.  A Rational Theory of the Size of Government , 1981, Journal of Political Economy.

[79]  N. Kaldor.  Alternative theories of distribution , 1955 .

[80]  T. W. Anderson,et al.  Estimation of the Parameters of a Single Equation in a Complete System of Stochastic Equations , 1949 .