Income Inequality Is Not Harmful for Growth: Theory and Evidence

Hongyi Li () and Heng-Fu Zou ()

No 74, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: The paper shows that income inequality may theoretically lead to higher economic growth if public consumption enters the utility function. Empirically, baseline estimations and a sensitivity analysis show that income inequality is positively, and most of the time significantly, associated with economic growth. These findings stand in sharp contrast to the negative association between inequality and growth propounded by Alesina and Rodrik and by Persson and Tabellini.

Pages: 17 pages
Date: 1998-10
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Citations: View citations in EconPapers (356)

Published in Review of Development Economics, Volume 2, Issue 3, pages 318¨C334, October 1998

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Related works:
Journal Article: Income Inequality is not Harmful for Growth: Theory and Evidence (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:74

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