 How does inequality affect long-run growth? Cross-industry, cross-country evidenceEconomic Modelling, 2021, vol. 95, issue C, 274-297 Abstract: Does inequality affect long-run growth, if so, how? To answer these questions, we examine whether industries technologically more dependent on external finance, human capital, physical capital, and contracts grow disproportionally slower in countries that had higher levels of inequality in the 1700s and 1800s. Using data for 27 manufacturing industries across 88 countries during 1981–2015, we show that industries more dependent on financial markets experienced lower long-run growth in real output, number of employees and real salaries in countries that were a priori more unequal compared to more egalitarian. There is no evidence that industries intensive in human capital experienced any differential growth in unequal countries compared to more egalitarian. However, industries intensive in physical capital had lower growth in salaries, and industries with complex contractual arrangements had lower growth in the number of firms. These findings provide important policy implications, particularly for countries with persistently high or growing inequality. Keywords: Inequality; Growth; Benchmark analysis; Instrumental variables (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:95:y:2021:i:c:p:274-297 DOI: 10.1016/j.econmod.2020.11.016 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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