Unfair inequality and growth

Gustavo Marrero and Juan Rodríguez

Scandinavian Journal of Economics, 2023, vol. 125, issue 4, 1056-1092

Abstract: Fighting against economic inequality is one fundamental social goal in the agendas of most governments. However, recent studies highlight that people actually prefer unequal societies, as they accept inequality generated by an individual's effort and wish to reduce only unfair inequality (generated by factors beyond an individual's control). This distinction might help to explain the fundamental unsolved question about whether inequality is good or bad for growth: unfair inequality (UI) could be growth‐deterring, while fair inequality (FI) might be growth‐enhancing. We derive a reduced‐form growth equation from a stylized overlapping‐generations model with human capital that includes FI, UI, and poverty. Then, using an instrumental variable approach, we show for alternative samples and inequality measures at the worldwide level that the estimated coefficient associated with UI is always negative, while the coefficient of total inequality increases when UI is included in the regression. Moreover, we find that poverty mediates this relationship because the higher the poverty rate, the smaller the impact of either type of inequality on growth.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/sjoe.12531

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:125:y:2023:i:4:p:1056-1092

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().