Is Poverty and Inequality Actually Good for Growth?

Maria Lissowska

Forum for Social Economics, 2015, vol. 44, issue 2, 133-158

Abstract: This paper aims to provide some evidence on the not necessarily positive impact of poverty and inequality on growth. It follows the line of argument that these features of society, while actually creating pressure for efficiency and enabling more savings, may impede sustainable growth. The recent financial crisis and the following period of austerity have made these arguments highly relevant. The findings of the empirical analysis of this paper are that inequality in the context of consumerism and easy credit may lead to over-borrowing and excessive consumption, which is ultimately detrimental to its sustainability. Poverty also causes deterioration in general trust, disabling smooth cooperation with lower transaction costs. Inequality existing in a given society deepens this effect.

Date: 2015
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DOI: 10.1080/07360932.2014.951377

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