Inequality, Redistribution, and Growth in Developed Countries

Andrea Festa

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2018, vol. 64, issue 4, 297-323

Abstract: This paper examines the effect of inequality and redistribution on growth in a panel of developed OECD countries with dynamic fixed effects (DFE) estimates. It is found out that redistribution is neutral to growth while disposable inequality is weakly positive for long-run aggregate output. Population growth is also a determinant of aggregate output. On the other hand, the analysis does not find evidence of a significant effect of both inequality and redistribution in the short-run as well as of top and bottom inequality. The analysis suggests that in economies that are more unequal a win-win process to increase equality and growth through redistributive taxes is likely to be effective, even if the overall effect is low and time demanding.

Keywords: Inequality; Redistribution; Growth (search for similar items in EconPapers)
Date: 2018
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