Inequality of Outcomes, Inequality of Opportunity, and Economic Growth

Rafael Carranza

No 534, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Is the relationship between inequality of opportunity (IOp) and economic growth different from the relationship between inequality of outcomes and economic growth? I answer this question using System GMM regressions applied to data for 27 European countries covering the period 2005-2011. I find that a one-standard deviation increase in IOp results in a statistically significant decrease in growth rates, ranging from 0.65 to 1.03 percentage points. On the other hand, inequality of outcomes has no statistically significant effect. The estimates are robust to the choice of instrumental variables and estimation approach. Additional analysis reveals that human capital levels partly explain this relationship, and that the effect is stronger for inequality indexes that are sensitive to changes in the middle of the distribution, with bottom-sensitive indexes having almost no effect.

Keywords: Economic growth; equality of opportunity; gross national income. (search for similar items in EconPapers)
JEL-codes: D31 D63 O47 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-05
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Citations: View citations in EconPapers (2)

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