Inequality and Growth: A Review on a Great Open Debate in Economics

Reto Foellmi and Enea Baselgia

No 2205, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: What is the relationship between inequality and growth? This question has occupied and fascinated social scientists for more than a century. This chapter critically reviews the recent empirical and theoretical literature on the complex interplay between inequality and economic growth. Inequality might come in many forms: (top) incomes, wages, wealth, land or opportunities. At the same time, growth performance could be measured as average growth rates, variability of growth or the potential for growth to "take off". This survey considers causality running from inequality to growth; hence, the Kuznets hypothesis is only touched on in passing. The empirical literature estimating the effect of inequality on growth has produced a wide range of results, precluding clear-cut conclusions on the inequality-growth relationship. Consequently, it remains central to understand the underlying economic causes and channels through which (different aspects of) inequality can promote or hamper economic growth. This chapter aims to provide a broad overview of the contemporary results and an outline for prospective empirical and theoretical work.

Keywords: Economic Growth; Inequality; Redistribution; Theory and Evidence (search for similar items in EconPapers)
JEL-codes: D30 O10 O31 O40 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-07
New Economics Papers: this item is included in nep-gro and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Inequality and Growth: A Review on a Great Open Debate in Economics (2022)
Working Paper: Inequality and growth: a review on a great open debate in economics (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2022:05

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