Inequality of opportunity and economic growth: A cross-country analysis

Francisco Ferreira, Christoph Lakner, Maria Ana Lugo and Berk Özler

No 335, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Income differences arise from many sources. While some kinds of inequality, caused by effort differences, might be associated with faster economic growth, other kinds, arising from unequal opportunities for investment, might be detrimental to economic progress. We construct two new metadata sets, consisting of 118 household surveys and 134 Demographic and Health Surveys, to revisit the question of whether inequality is associated with economic growth and, in particular, to examine whether inequality of opportunity – driven by circumstances at birth - has a negative effect on subsequent growth. Results are suggestive but not robust: while overall income inequality is generally negatively associated with growth in the household survey sample, we find no evidence that this is due to the component we attribute to unequal opportunities. In the DHS sample, both overall wealth inequality and inequality of opportunity have a negative effect on growth in some of our preferred specifications, but the results are not robust to relatively minor changes. On balance, although our results are suggestive of a negative association between inequality and growth, the data at our disposal does not permit robust conclusions as to whether inequality of opportunity is bad for growth.

Keywords: inequality; inequality of opportunity; economic growth. (search for similar items in EconPapers)
JEL-codes: D31 D63 O40 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-05
New Economics Papers: this item is included in nep-gro, nep-lam, nep-ltv and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Inequality of Opportunity and Economic Growth: A Cross-Country Analysis (2014)
Working Paper: Inequality of opportunity and economic growth: a cross-country analysis (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:inq:inqwps:ecineq2014-335

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