Inequality is Bad for Growth of the Poor (But Not for That of the Rich)

The paper assesses the impact of overall inequality, as well as inequality among the poor and among the rich, on the growth rates along various percentiles of the income distribution. The analysis uses micro-census data from U.S. states covering the period from 1960 to 2010. The paper finds evidence that high levels of inequality reduce the income growth of the poor and, if anything, help the growth of the rich. When inequality is deconstructed into bottom and top inequality, the analysis finds that it is mostly top inequality that is holding back growth at the bottom.

Bibliographic Details

Main Authors:	van der Weide, Roy, Milanovic, Branko
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014-07
Subjects:	AGGREGATE INCOME, ANNUAL GROWTH, AVERAGE ANNUAL, AVERAGE GROWTH, AVERAGE GROWTH RATE, AVERAGE INCOME, AVERAGE INCOME GROWTH, AVERAGE INCOMES, CAPITAL ACCUMULATION, CONFLICT, CREDIT CONSTRAINT, CREDIT CONSTRAINTS, CREDIT MARKET, CREDIT MARKET IMPERFECTIONS, CROSS-COUNTRY ANALYSIS, CROSS-COUNTRY DATA, DATA AVAILABILITY, DATA QUALITY, DATA SETS, DEPENDENT VARIABLE, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT RESEARCH, DISPOSABLE INCOME, DISTRIBUTIVE POLITICS, DYNAMIC PANEL, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC LITERATURE, ECONOMIC REVIEW, ECONOMIC STUDIES, EFFECT OF INEQUALITY ON GROWTH, EMPIRICAL EVIDENCE, EMPIRICAL RESULTS, EMPIRICAL STUDIES, EMPIRICAL TEST, ERROR TERM, FINANCIAL CRISIS, FIXED EFFECTS, FIXED EFFECTS ESTIMATION, FOREIGN AID, GINI COEFFICIENT, GROSS INCOME, GROWTH LITERATURE, GROWTH PATTERN, GROWTH RATE, GROWTH RATES, GROWTH REGRESSION, GROWTH REGRESSIONS, GROWTH SPELLS, GROWTH THEORIES, GROWTH-INEQUALITY RELATIONSHIP, HETEROGENEOUS COMMUNITIES, HIGH INCOME COUNTRIES, HIGH INEQUALITY, HOUSEHOLD DATA, HOUSEHOLD INCOME, HOUSEHOLD MEMBERS, HOUSEHOLD SIZE, HOUSEHOLD SURVEYS, HUMAN CAPITAL, HUMAN CAPITAL ACCUMULATION, INCOME, INCOME DATA, INCOME DISTRIBUTION, INCOME DISTRIBUTIONS, INCOME GROWTH, INCOME INEQUALITY, INCOME REDISTRIBUTION, INDEPENDENT VARIABLES, INEQUALITY, INEQUALITY LEVELS, INEQUALITY MEASURE, INEQUALITY MEASURES, INEQUALITY OF OPPORTUNITY, INEQUALITY-GROWTH RELATIONSHIP, INTERVENTIONS, LABOR FORCE, LEVELS OF INEQUALITY, LOW INCOME, LOW INEQUALITY, MACROECONOMIC IMPLICATIONS, MACROECONOMICS, MARGINAL PROPENSITY, MARGINAL TAX, MARGINAL TAX RATE, MARKET INCOME, MEASURE OF INEQUALITY, MEASURES OF INEQUALITY, MEASURING INCOME INEQUALITY, MEDIAN INCOME, MEDIAN VOTER, MEDIAN VOTER HYPOTHESIS, MEMBER COUNTRIES, MICRO DATA, MIDDLE CLASS, NEGATIVE COEFFICIENT, NEGATIVE CORRELATION, NEGATIVE EFFECT, NEGATIVE IMPACT, NEGATIVE RELATIONSHIP, NEGATIVE SIGN, NEW GROWTH THEORIES, OVERALL INEQUALITY, PENSIONS, PER CAPITA GROWTH, PER CAPITA GROWTH RATE, PER CAPITA INCOME, PER CAPITA INCOMES, POINT DECLINE, POLICY DISCUSSIONS, POLICY RESEARCH, POLITICAL ECONOMY, POLITICAL INSTABILITY, POLITICAL SCIENCE, POOR GROWTH, POSITIVE EFFECT, POSITIVE IMPACT, POSITIVE RELATIONSHIP, PRO-POOR, PRO-POOR GROWTH, PROPERTY RIGHTS, PUBLIC CHOICE, PUBLIC ECONOMICS, PUBLIC GOODS, RATE OF GROWTH, REAL GROWTH, REAL INCOME, REAL INCOMES, REDISTRIBUTIVE POLICIES, REGIONAL DUMMIES, REGRESSION DIAGNOSTICS, RESIDUAL INEQUALITY, RICH COUNTRIES, RISING INEQUALITY, SAVINGS, SENSITIVITY ANALYSIS, SIGNIFICANT EFFECT, SIGNIFICANT NEGATIVE, SOCIAL SECURITY, STANDARD DEVIATION, TAXATION, TOTAL INEQUALITY, UNEMPLOYMENT, UNEQUAL SOCIETIES, WAGES, WAR, WORLD INCOME INEQUALITY,
Online Access:	http://documents.worldbank.org/curated/en/2014/07/19756057/inequality-bad-growth-poor-not-rich https://hdl.handle.net/10986/19363
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