Inequality and growth: The neglected time dimension
Halter,D. Oechslin,M.C. Zweimüller,J.
Halter,D.
Oechslin,M.C.
Zweimüller,J.
Abstract
Inequality affects economic performance through many mechanisms, both beneficial and harmful. Moreover, some of these mechanisms tend to set in fast while others are rather slow. The present paper (i) introduces a simple theoretical model to study how changes in inequality affect economic growth over different time horizons; (ii) empirically investigates the inequality–growth relationship, thereby relying on specifications derived from the theory. Our empirical findings are in line with the theoretical predictions: Higher inequality helps economic performance in the short term but reduces the growth rate of GDP per capita farther in the future. The long-run (or total) effect of higher inequality tends to be negative.
Description
Date
2014-03
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Volume Title
Publisher
Research Projects
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Keywords
Inequality, economic growth, short-term effects, long-run effects, O11 - Macroeconomic Analyses of Economic Development, O15 - Human Resources ; Human Development ; Income Distribution ; Migration, O42 - Monetary Growth Models, SDG 8 - Decent Work and Economic Growth
Citation
Halter, D, Oechslin, M C & Zweimüller, J 2014, 'Inequality and growth : The neglected time dimension', Journal of Economic Growth, vol. 19, no. 1, pp. 81-104. https://doi.org/10.1007/s10887-013-9099-8