Wealth Inequality and Economic Growth: Evidence from the World Inequality Database

Rachel Steenbrink and Ahmed Skali

No 1417, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: Although it is often argued that wealth inequality matters more for economic growth than income inequality, this relationship has rarely been studied empirically, with a few exceptions covering a very restricted country sample or short timeframe. Leveraging hitherto unexploited wealth inequality data from the World Inequality Database, covering a panel of 165 countries between 1995 and 2019, we document a negative and statistically significant relationship between wealth concentration at the top of the distribution and economic growth. A one standard deviation increase in wealth inequality within countries is associated with a 0.4 percentage points (17%) decline in growth rates. Instrumental variables support a causal interpretation of the results. The results survive a large battery of robustness checks, and we find little evidence to suggest a heterogeneous relationship.

Keywords: Wealth Inequality; Economic Growth; Economic Development (search for similar items in EconPapers)
JEL-codes: D31 D63 O10 O47 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-fdg and nep-gro
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1417

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