Monday, October 9, 2017

Trends in Income Inequality and its Impact on Economic Growth

Here is a link to an empirical analysis of income inequality and economic growth by Federico Cingano of OECD.

One of the main takeaways is that higher inequality (higher Gini coefficient or higher Palma ratio) results in less investment in education by households in the poorest quintiles (poorest 40% of the population), which results in less economic growth.  The study also finds that increases in the incomes of the richest households has no effect on economic growth and that redistribution policies (higher taxes for the rich and transfers to the poor) need not have an adverse impact on economic growth.

1 comment:

  1. The abstract provided some insightful details about income inequality and economic growth. Some questions I have is: Why is there a gap between low income households and the rest of the population? How does this gap affect low income individuals and what drives them attain a quality education?

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