Inequality and Economic Growth: The Perspective of the New Growth Theories

Philippe Aghion, Eve Caroli and García-Peñalosa, Cecilia

Scholarly Articles from Harvard University Department of Economics

Abstract: We analyze the relationship between inequality and economic growth from two directions. The first part of the survey examines the effect of inequality on growth, showing that when capital markets are imperfect, there is not necessarily a trade-off between equity and efficiency. It therefore provides an explanation for two recent empirical findings, namely, the negative impact of inequality and the positive effect of redistribution upon growth. The second part analyzes several mechanisms whereby growth may increase wage inequality, both across and within education cohorts. Technical change, and in particular the implementation of "General Purpose Technologies," stands as a crucial factor in explaining the recent upsurge in wage inequality.

Date: 1999
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Published in Journal of Economic Literature

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Related works:
Journal Article: Inequality and Economic Growth: The Perspective of the New Growth Theories (1999)
Working Paper: Inequality and economic growth: the perspective of the new growth theories (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:12502063

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