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Inequality of opportunity and growth

Gustavo Marrero () and Juan Rodríguez ()

No 154, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Theoretical and empirical studies exploring the effects of income inequality upon growth reach a disappointing inconclusive result. This paper postulates that one reason for this ambiguity is that income inequality is actually a composite measure of at least two different sorts of inequality: inequality of opportunity and inequality of returns to effort. These two types of inequality affect growth through opposite channels, so the relationship between income inequality and growth is positive or negative depending on which component is larger. We test this proposal using inequality-of-opportunity measures computed from the PSID database for 23 states of the U.S. in 1980 and 1990. We find robust support for a negative relationship between inequality of opportunity and growth, and a positive relationship between inequality of returns to effort and growth.

Keywords: income inequality; inequality of opportunity; economic growth. (search for similar items in EconPapers)
JEL-codes: D63 E24 O15 O40 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010
New Economics Papers: this item is included in nep-fdg
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Journal Article: Inequality of opportunity and growth (2013) Downloads
Working Paper: Inequality of Opportunity and Growth (2009) Downloads
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