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Inequality and growth: the neglected time dimension

Daniel Halter, Manuel Oechslin () and Josef Zweimüller ()

Journal of Economic Growth, 2014, vol. 19, issue 1, 104 pages

Abstract: Inequality affects economic performance through many mechanisms, both beneficial and harmful. Moreover, some of these mechanisms tend to set in fast while others are rather slow. The present paper (i) introduces a simple theoretical model to study how changes in inequality affect economic growth over different time horizons; (ii) empirically investigates the inequality–growth relationship, thereby relying on specifications derived from the theory. Our empirical findings are in line with the theoretical predictions: Higher inequality helps economic performance in the short term but reduces the growth rate of GDP per capita farther in the future. The long-run (or total) effect of higher inequality tends to be negative. Copyright Springer Science+Business Media New York 2014

Keywords: Inequality; Economic growth; Short-term effects; Long-run effects; O11; O15; O43 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Inequality and growth: the neglected time dimension (2011) Downloads
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DOI: 10.1007/s10887-013-9099-8

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